In the fourth installment of our 2022 Trade Secrets Webinar Series, Seyfarth attorneys Kate Perrelli, Matt Simmons, and Robyn Marsh discussed restrictive covenant agreements ("RCAs"), including non-competes, non-solicitations, and NDAs. Plus they discussed best practices and practical tips companies can implement regarding restrictive covenant agreements. View a recording of this webinar here.
As a follow up to this webinar, our team wanted to highlight:
- All or some combination of post-employment RCAs (nondisclosure, non-compete, non-solicit of employees and customers) can be an effective tools in protecting an employer's legitimate business interests: confidential information, trade secrets, and customer goodwill.
- Enforcement of these provisions are typically driven by state laws, and in the non-compete context are constantly changing and employers need to stay up to date on these changes. Federal law may some day impact non-competes as well.
- To maximize enforcement of these provisions, be sure to tailor them narrowly so that they are aimed at protecting legitimate business and are not over broad.
- Employers should be sure to supplement these tools with training of workforce on importance of protecting confidential information and trade secrets, and make sure your own house is in order with secure systems, password protected access to confidential information and trade secrets, and strict onboarding and off boarding of employees around these issues.
- When reviewing your current RCA for enforceability and/or whether your company may need to update it, focus on applicable State(s) law and whether your RCA satisfies the basic limitation requirements of (a) consideration, (b) time, (c) scope of activity, and (d) geography.
- In determining the reasonableness of your current RCA, ensure the restrictions are reasonable and narrowly tailored as it relates to the employee's position (higher versus lower-level employee) and the type of business (local hair salon versus multinational business).
- When considering drafting and implementing new restrictive covenants, assess location(s) of workforce and assets that need protection by virtue of restrictive covenants to determine what state laws apply that will affect enforceability. While there is no "one size fits all" approach, agreements can be drafted and implemented in such a way to address multi-jurisdictional corporate interests.
- Remember that many state laws surrounding restrictive covenants require some sort of consideration that goes beyond continued employment, as well as the requirement of sufficient notice and/or attorney consultation by the employee signing the agreement, so make sure you have considered the time and the money that will be needed for the rollout of restrictive covenants to balance the need to protect company assets while adhering to state statutory and common laws.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.