Arthur R. Lehman, L.L.C.

Restrictive covenants: which employees can be required to sign?

Trademarks and copyrights help protect valuable and publicly-known intellectual property for businesses. There is another type of asset that is vital to the success of any business enterprise. We are talking about trade secrets. This can refer to any confidential business information from client contact lists to training procedures for its talent. It accounts for basically anything that could give them a competitive edge. 

Unlike trademarks or copyrights, the value of trade secrests for the company lies in keeping these secrets well... secret. How does one accomplish that without publishing the information that the business wants to protect? The answer is through restrictive covenants such as a confidentiality or non-compete agreement with employees.

Covenants that either restrict or limit an individual's employment opportunities are highly scrutinized by courts. The reality is that these agreements are signed at the beginning of an employment relationship. They don't come under the purview of the court until the relationship changes and either the employer wants to enforce the clause or an employee wants to declare that it is unenforceable. 

Nationwide sandwich giant Jimmy John's recently came under fire for a non-compete clause that is allegedly on the far side of too restrictive. The clause applies to low-wage employees and restricts them from working for a competing sandwich company for at least two years.

Can these agreements cover low-wage workers and not just executive or specialized talent? Where should the line be drawn? The fact that there isn't an absolutely clear standard is exactly what opens the door for disputes. If you represent a business that needs to protect its interests with a restrictive covenant, it is vital that you take care in selecting an attorney to represent you in any contract dispute.

Source: 12 News, "Jimmy John's under fire for worker contracts," Ben Rooney, Oct. 22, 2014

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