Employers often enter into post-employment restrictive covenants (commonly referred to as non-compete agreements) with employees only to find that when the employees leave, the restrictive covenants are not enforceable or do not provide sufficient value to the company.
Here are seven steps to improve post-employment restrictions:
1. Identify the Legitimate Interest to be Protected
An employer must have a legitimate interest that will be protected by restraining an employees ability to compete. Protecting trade secrets, confidential information, or unique relationships with clients are generally recognized in many states as legitimate interests that will support enforcement of a restrictive covenant. For example, when an employee has access to marketing or product development plans, the employer may have a legitimate protectable interest in preventing the employee from using knowledge of that confidential information for a competitor. Similarly, if an employee develops unique relationships with the employers clients, the employer may have a legitimate interest in protecting the goodwill inherent in those relationships.
The employer should have a clear understanding of the legitimate interests a restrictive covenant is designed to protect before entering into the restrictive covenant. Once the protectable interests are identified and understood, the restrictive covenant should be crafted to protect those interests without overreaching.
2. Ensure that the Restrictive Covenant is Reasonable
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