When Enforcing Restrictive Covenants, Timing is Everything
What point in time should a court focus on when assessing whether an employer has legitimate interests to protect?
January 21, 2022 at 10:00 AM
7 minute read
Consider the following fact pattern: In 2006, Acme Sandwich Company hired Jane Doe to make sandwiches at one of its shops in Roseland, New Jersey. At that time, Acme required Jane to sign an employment agreement that contained a restrictive covenant stating that if Jane ever leaves her employment, she cannot work for a competing company within 20 miles of Roseland for a period of one year. Jane was an excellent employee. Five years later, Acme promoted her to regional manager, and five years after that in 2016, to vice president of sandwich innovation. Acme did not ask her to sign a new employment agreement in connection with either promotion. By 2021, Jane felt that she accomplished all she could at Acme and accepted employment with the Wonka Sandwich Company in Newark, New Jersey, as its director of marketing. Acme got wind of her hire and sued Jane in the Chancery Division to enforce the restrictive covenant in her 2006 employment agreement.
Acme, of course, argues that the covenant is reasonable and enforceable because it is necessary to protect Acme's legitimate interests. Acme says that as vice president of sandwich innovation, Jane was privy to Acme's confidential business strategies, marketing plans, and trade secrets concerning its sandwich ingredients. Jane responds that Acme's temporal focus is incorrect. She argues that the restrictive covenant is unenforceable because it did not protect any legitimate interests of Acme in 2006, when she entered into it and was merely a sandwich maker. Who's correct? Jane is. Or at least she should be.
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