Non-compete are sometimes included in employment agreements to protect a company’s intellectual property and goodwill. However, unless properly drafted, executed and applied, non-compete agreements can become the subject of litigation as company’s try to enforce their restrictions and former employees challenge their validity and sue to be free from their restraints. The Jacobs Law LLC represents Boston area businesses facing litigation as plaintiff or defendant in the challenge to or enforcement of covenants not to compete, non-solicitation agreements, confidentiality and non-disclosure agreements.
What makes a Non-Compete Agreement valid (or subject to challenge)?
When non-compete agreements are challenged in court, judges and juries typically are tasked with determining whether the agreement is reasonable or not. Factors which go toward a non-compete agreement’s reasonableness include whether it is limited to a specific period of time and a particular geographic area. The length of the employee’s tenure at the company may be another factor in deciding whether it is reasonable to enforce a noncompete agreement against the individual.
The timing of the non-compete agreement can also be a factor in deciding whether the agreement is enforceable. A non-compete provision included in an employment agreement when the employee is initially brought on is generally upheld, but an agreement or provision added after the employee is already working for the company may fail for lack of consideration. Other times non-compete agreements may be upheld is when they are part of an agreement at the end of the employment relationship or as part of the sale of a business to keep the seller from competing with the buyer.
The employer must also have a need for the noncompete agreement, such as to protect trade secrets or confidential data and to protect the company’s good will by keeping a former employee from poaching its clients. Courts face a difficult task of balancing the needs of the employer with the rights of the employee, while also considering the public interest in healthy competition.
In Massachusetts, non-compete agreements are prohibited for certain professions, such as doctors, nurses, psychologists, social workers, broadcasters and lawyers.
Non-solicitation agreements are meant to keep former employees from stealing or luring away the company’s clients, prospective clients or other employees. Like non-compete agreements, non-solicitation agreements must be negotiated in exchange for some consideration (including the initial hiring), and they must be reasonably drafted to protect a legitimate business interest. Typically, non-solicitation agreements can be drafted to last for a longer duration than non-compete agreements and still be valid. The specialized nature of the business is often an important factor in determining whether a non-solicitation agreement is reasonable.
Employers can require employees to sign confidentiality or non-disclosure agreements to protect trade secrets and other confidential information, and these agreements can remain in effect for as long as the information remains a trade secret or otherwise confidential. It’s important in the agreement to define or spell out what is confidential information and what isn’t. It is also important for companies to understand that a non-disclosure agreement (NDA) is not the same as a non-compete. A former employee subject to an NDA could still go to work for a competitor or compete directly with the company in the absence of a non-compete agreement, so long as the individual maintains the confidentiality of protected information. Proving a breach in these situations can be complex and requires the assistance of skilled and experienced business litigation attorneys.
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For help enforcing non-compete agreements in Boston or defending them against challenges to their validity or enforceability, contact the Boston business litigation attorneys at The Jacobs Law LLC.