Employers ostensibly use restrictive covenants to prevent an employee from illegally bringing specific unique skills, knowledge, confidential information, or trade secrets to a competitor, thereby giving that competitor an unfair advantage in the marketplace. Additionally, these agreements can prevent the employee from soliciting or communicating with the previous employer’s customers. Restrictions are typically related to a specific period, geographic area, and/or scope of work. However, restrictive covenants are also used by the ex-employer to unlawfully bully the employee and prevent them from future employment in their chosen field. We have litigated restrictive covenants for both the employer and the employee.
Restrictive Covenants for Employers
A restrictive covenant lawsuit filed by an employer is the consequence of an alleged violation of the agreement, intended to protect trade secrets and ensure that information retains its value. A restrictive covenant will be y upheld only if the terms are reasonable. If too extensive, the agreement May be considered in restraint of trade. In other words, you cannot stop someone from earning a living by implementing a restrictive covenant. There must be a reasonable connection to the right of the organization to protect its trade secrets and confidential information in the restrictive covenant.
Many employers do not realize that a restrictive covenant agreement is not required to file a lawsuit and seek an injunction to stop an ex-employee from taking trade secrets. In other words, even without a restrictive covenant, an employer can protect itself from the misuse of trade secrets. The court will typically evaluate whether an employee is unlawfully using a previous employer’s skills, confidential information, or trade secrets. For example, an injunction would likely last six months if an employee goes to a competitor with the previous employer’s six-month marketing strategy.
On the other hand, if the employee took source code, a permanent injunction might be sought. Restrictive covenants involve a juggling of many factors. They are different in every circumstance, and sometimes emergency filings are necessary to protect a business from imminent damage.
Restrictive Covenants for Employees
Employees are sometimes accused of violating restrictive covenants when they have done no such thing, or the agreement is unlawfully restrictive in terms of time, geographic area, and scope. The employee is then sued with an injunction. Often, as a result, the employee cannot find a job. If the employee has found a job, the ex-employer’s lawsuit can create a rift between the employee and their new employer.
If your restrictive covenant is being disputed, contact us today to schedule a consultation, whether you are an employer or employee.