Restrictive covenants are used by employers to prevent an employee from illegally bringing certain skills, knowledge, or trade secrets to a competitor. Additionally, these agreements can prevent the employee from soliciting or communicating with the previous employer’s customers. Restrictions are typically related to a certain time period, geographic area, and/or scope of work.
However, restrictive covenants can also cause an employee to be bullied by a company that either (a) claims the employee violated the terms of such an agreement or (b) applies a covenant that is too restrictive from a legal perspective.
This is one of the few areas in which Kolman Law can represent an employer or the employee.
Restrictive Covenants for Employers
A restrictive covenant lawsuit filed by an employer is the consequence of an alleged violation of the agreement, which is intended to protect trade secrets and ensure that confidential information, learned in the scope of employment, retains its value. This can also discourage other individuals from following the same path.
A restrictive covenant is only upheld if the terms are reasonable. If overbroad, the agreement can 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 itself with regards to skills or confidential information an employee has learned that may be useful to another employer.
Many employers do not realize that a restrictive covenant agreement is not a requirement to file a lawsuit and seek an injunction. 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 misappropriating the skills, knowledge, confidential information, or trade secrets of a previous employer.
For example, if an employee goes to a competitor with the previous employer’s six-month marketing strategy, the injunction would likely last six months. On the other hand, if the employer took source code that could be leveraged long-term by the new employer, this would be considered illegal and a permanent injunction would be sought. Restrictive covenants involve very complex litigation and require an experienced attorney to analyze the facts and circumstances.
Restrictive Covenants for Employees
Employees can be 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. As a result, the employee cannot find a job. If the employee has found a job, the lawsuit could create a rift between the employee and the new employer, possibly resulting in termination.
We fight for the rights of these individuals to make sure they can find a job that is commensurate with their skills and experience, as long as they don’t take anything unlawfully from their previous employer.
If your restrictive covenant is being disputed, whether you are an employer or employee, contact us today to schedule a consultation.