When someone in New York starts a business, they put a lot of effort into making sure it is successful. Often businesses rely on employees like sales personnel, product developers or even chefs, to build up a business. Such employees, however, usually have access to proprietary business information. Proprietary business information can include customer lists, trade secrets like recipes or product formulas, or other intellectual property. If an employee with such information leaves the business, there is always the possibility that that business’s proprietary information could fall into the hands of a competitor.
One way business owners — and employees — can protect themselves and avoid expensive employment litigation is through the use of non-compete agreements. A non-compete agreement is a contract that an employer enters into with an employee. In such an agreement, the employee generally pledges not to use or disclose any proprietary information to which she or he has access to in order to compete with the business in the event the employee goes to work elsewhere.
Non-compete agreements can be geographically-based, such as when a salesperson agrees not to work in a certain territory after leaving a company. Non-compete agreements can also be based on time, such as when a stylist agrees not to go to work for another salon in the area for a year. Usually, in these types of situations, there is both a geographic and a temporal element: An employee agrees not to work for a competitor in Midtown Manhattan for a year. Geographic and temporal terms that are too restrictive have been frowned upon by courts. This is why it’s important to have experienced employer or employee representation when drafting and reviewing such agreements.
A non-compete agreement only works if it’s specific enough to protect the business and be enforceable in court. A poorly drafted agreement may not cover all possible scenarios, but one with draconian terms may not be enforceable. A seasoned employment attorney can help ensure that a non-compete agreement is restrictive enough for the employer without being so restrictive that a court won’t enforce it.
Source: FindLaw, “Creating an Enforceable Noncompete Agreement,” accessed Feb. 11, 2018