Overview: One type of employment contract is the restrictive covenant. Employers should safeguard their trade secrets, client or customer information, employee lists or other information that may give them a competitive edge in their industry by requiring employees to sign a restrictive covenant, i.e., noncompete agreement, nonsolicitation agreement, and/or nondisclosure agreement.
Although restricting the use of this information by employees during and after their term of employment may be vital to the protection of an employer's business, an employer must ensure that the terms of the agreement protects the employer's legitimate business interests and extends no further than is reasonably necessary to protect those interests. Employers should be aware, however, that some states do not enforce restrictive covenants at all, while others place restrictions on the types of information that is confidential, the geographic scope of the covenant as well as the duration.
Trends: Restrictive covenants are often challenged by former employees. Employers should carefully review the terms of their restrictive covenants to ensure they don't force an employee out of the entire industry - this would be considered overbroad and the courts may refuse to enforce the agreement, thereby possibly leaving an employer's proprietary information exposed to a former employee to be used for his or her own benefit.
Melissa A. Silver, J.D., Legal Editor
In-depth review of the spectrum of Vermont employment law requirements HR must follow with respect to terms of employment.
Effective September 1, 2013, Texas employers will have a more consistent and predictable legal framework for protecting their trade secrets. Texas has adopted the Uniform Trade Secrets Act (UTSA).
In-depth review of the spectrum of Texas employment law requirements HR must follow with respect to terms of employment.
XpertHR had added certifications that employers should provide to new hires to ensure that they are not subject to any restrictions on competition or subject to an agreement that would prevent them from using the confidential information of a former employer. The Terms of Employment section of the Employment Law Manual also now includes a discussion on obtaining these certifications at or prior to hiring.
The terms and conditions that govern the employment relationship are typically governed by federal and state employment laws, including antidiscrimination laws. This section helps HR professionals avoid discriminating on the basis of race, color, religion, sex, pregnancy, national origin, age, disability, genetic information and veteran status throughout the employment relationship.
An employer may use this certification with new employees in order to make clear to them that they cannot use confidential or proprietary information they acquired during their former employment. If an employer does not use this certification and an employee improperly uses the confidential information of the former employer and the new employer knew or should have known that the employee was using such information for the new employer's benefit; both the employee and the new employer can be subject to a legal action by the former employer/competitor.
Employers should require prospective employees to sign this certification prior to hiring to ensure that he or she is not subject to a restrictive covenant with his or her current or former employer that would restrict his or her ability to perform the job. Employers should require prospective hires to sign this certification because if the employer does not and it hires an employee who is subject to a restrictive covenant, the former employer may not only file an action against the employee, but against the new employer.
In-depth review of the spectrum of New York employment law requirements HR must follow with respect to the terms of employment.
In-depth review of the spectrum of Tennessee employment law requirements HR must follow with respect to terms of employment.
In-depth review of the spectrum of New Mexico employment law requirements HR must follow with respect to employment offer.
Guidance for HR on the advantages of using restrictive covenants.
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