ment. The employment relationship is less stable than in the past, high level talent is in demand and recruiting is aggressive. Intellectual property – easily carried between companies – is more valuable than ever before. Customer information, pricing data, business plans, and proprietary marketing strategies are all at risk.
Businesses looking to negotiate this rocky terrain have a valuable tool at their command: restrictive covenants. These written agreements can keep departing employees from competing against former employers, soliciting the same customers or employees, or using a former employ- er’s sensitive information for their own ends. “Most employers have confidential, proprietary, or sensitive information,” says Joon Hwang, Shareholder in the Tysons Corner, Va., office of Littler Mendelson, P.C. law firm dedicated to defending employers in labor and employment disputes. “Or they may have certain employees with desirable skills, experience, training, or intimate knowledge considered integral and invaluable to their businesses. Restrictive covenants, drafted properly, can be a powerful tool for protecting all of this valuable information.”
There are two sides to the trade secret coin. Incoming personnel must also be quizzed about any restrictive cov- enants signed at their former employer. And they must be prohibited from bringing along customer lists, marketing plans, financial records, confidential information, or
Automotive Recycling
anything else that might be determined to be the former employer’s property.
Non-Competes
The most powerful restrictive covenant prohibits the employee from accepting employment at a competitor. Called “covenants not to compete,” or “non-competes,” these agreements specify a period of time for the prohibi- tion and a geographic area where the prohibition applies. They usually also prohibit the individual from serving as an independent contractor for, or having any ownership interest in, a competitive organization.
“I generally do counsel my clients to have non-com-
petes, certainly with their higher-level employees,” says Jeffrey A. Dretler, a partner at Rubin and Rudman, Boston. “I think it’s a very important and effective tool for protecting company confidential information and relationships in which they have invested.” So far so good. But employers need to be wary of a not-so-secret vulnerability of these covenants: The possi- bility they will be deemed invalid by a court of law. That’s because such covenants raise concerns about limiting the capacity of employees to earn their livelihoods. Employers can help improve the enforceability of their non-competes by ensuring the terms balance the con- cerns of the employer with the reasonable interests of the employees. “The wider the covenant goes geograph-
May-June 2021 //49
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