When a key employee leaves a company, it can be traumatic for all concerned—the employer, the employee and even the new employer. These days, such an employee is often subject to restrictive covenants that are designed to protect the prior employer. Such covenants typically prohibit competition, solicitation and the disclosure of confidential information. In considering litigation relating to such agreements—whether from the perspective of the employer or the employee—the following five tips may help guide your analysis.
It’s not (only) about the agreement
Unlike vanilla contract cases, noncompete agreements are never governed by the four corners of the document alone. Instead, they represent restraints of trade that are viewed as inimical to our free market economy and, as such, they must pass antitrust scrutiny. That is, a court will not impose greater restraints than the agreement provides, but it may well trim back even restraints that are clearly spelled out in the contract. So it is critical for both employers and employees to appreciate that, for policy reasons, these agreements may not be enforced as written.
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