FTC Defense Lawyer Explains Non-Competition Restrictive Covenants

As has been widely reported, the Nevada legislature recently made some rather substantial changes to state law on non-competition restrictive covenants, effectively weakening an employer’s ability to protect trade secrets and proprietary information. See more, here.

Employers often seen to bind employees with access to proprietary, secret information to various restrictive covenants, including non-competes aimed at preventing a former employee from working for a competitor.

California is notoriously one of the most difficult states when it comes to enforcing non-competes against former employees. There exist limited exceptions which should be discussed with a legal professional.

Clearly, non-compete agreements exists, in part, to assist businesses with the protection of trade secret information. Judicial concern, however, tends to revolve around retraining a former employee’s right to earn a living and whether such restrictions are reasonable in scope, time and geography. Generally, restrictive covenants should also be narrowly tailored to protect the legitimate business interests of a business. Overly broad restrictive covenants are looked upon with judicial disfavor.

In addition to clearly setting forth the legitimate business interests being protected and other reasonable restrictions, a non-compete provisions should be supported by adequate consideration. Consideration could, depending upon the circumstances and jurisdiction, take the form of money or another benefit to the employee.

Some jurisdictions reserve the right to “blue-pencil,” or modify an otherwise unreasonable non-compete agreement, rather than holding the agreement entirely enforceable. The rules vary from jurisdiction to jurisdiction.

Businesses with locations in more than one state should thoroughly research applicable legal precedent while considering the preparation or modification of employment confidentiality agreements.

An experienced business attorney can assist businesses that believe an employee has breached a non-compete agreement. Conversely, experienced counsel can assist employees to evaluate the enforceability of agreements that may have been executed and what options exist, moving forward.

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Richard B. Newman is an Internet marketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns, representing clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, commercial litigation, advising clients on promotional marketing programs, and negotiating and drafting legal agreements.

ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result. Hinch Newman LLP | 40 Wall St., 35th Floor, New York, NY 10005 | (212) 756-8777.

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