VanAntwerp Attorneys, LLP
Phone: 606-618-0698

Is your company using restrictive employment agreements well?

Employment restrictions such as noncompete and nondisclosure agreements are popular with many employers. While they can limit the loss of important data, proprietary information, and key personnel, however, they do have downsides.

Most employers don't really want to keep employees who aren't happy, but restrictive employment agreements can have that effect. Current and prospective employees may resent or oppose them because they place limitations on their longer-term job prospects.

Moreover, courts and lawmakers are, on the whole, leaning toward limiting how restrictive these agreements can be. For example, many courts will invalidate such agreements when they are found to last too long or cover too great a geographic area.

How is your company using nondisclosure, noncompete and non-solicitation agreements?

First, let's get a handle on what agreements we're talking about:

Noncompete: Keep former employees from working with competitors

Nondisclosure: Keep employees from disclosing proprietary information

Customer non-solicitation: Prevent former employees from poaching customers

Employee non-solicitation: Prevents a party from attempting to poach valuable employees

Use the right type of agreement for what you're trying to accomplish.

7 steps toward better restrictive employment agreements

Your agreement is more likely to be enforceable if it's only as restrictive as necessary to meet a particular goal.

Work closely with your corporate counsel. Set clear goals and tailor your agreement to meet those goals. Here are some questions to ask and steps to take toward a tailored agreement.

1. Identify what you're trying to protect and who, specifically, has access to that data. It could be anything from customer lists and other proprietary information to trade secrets and other intellectual property. Choose the most appropriate type of agreement.

2. Think about the consequences. Having valued personnel sign restrictive agreements sends a signal that may not be welcome. It could also have real consequences in terms of their careers.

3. Consider the alternatives. Could you set a general policy? Limit access to the information to a smaller group of employees?

4. Set time and geographical limits. Your agreement could be invalidated if it restricts employees for too long or in an unreasonably large area.

5. Consider providing a quid pro quo. When employees are given something in exchange for signing, they may be more likely to comply than if the only benefit to signing is that they get to continue working for you. Also, some states require some form of additional consideration.

6. Be transparent with employees. Mention the agreement early in the interview process and explain your reasons and expectations.

7. Stay current with the law. Update any agreements that may be found too restrictive or which fail to meet other legal requirements as time passes.

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