The Legal Intelligencer
(by Brian D. Lipkin and Carly Loomis Gustafson)
When an employee quits, the employer might dig through its files, dust off an old noncompete agreement, and see what rights (if any) it has under the agreement. Does this scenario sound familiar?
Unfortunately, by the time an employee has quit, it’s too late to go back and correct an outdated or insufficient agreement. So, we recommend that each fall, employers look through their existing noncompete agreements (and other restrictive covenants, such as nonsolicitation agreements), and fix these eight common problems:
Problem No. 1: Over the years, the employee signed multiple, conflicting agreements.
Fix: When an employee signs a new agreement, it should clearly state that it replaces all previous agreements.
Problem No. 2: The employee did not receive consideration—such as a new position, raise, bonus or promise of employment for a fixed time period—in exchange for signing the agreement.
Fix: If an employer realizes that an employee may not have received adequate consideration, the employer can pay a bonus in exchange for signing a new agreement. By timing its review of restrictive covenants in the fall, an employer can prepare for employees to sign updated agreements when they receive year-end bonuses or raises.
Problem No. 3: The agreement doesn’t detail what the employee is restricted from doing.
Fix: We often see agreements that prohibit an employee from going to work for a “competitor.” The problem with this language is that it inevitably leads to a dispute about whether the new and old employers really compete with each other.
If an employer is concerned about employees leaving for specific companies, those companies should be named in the agreement. …
Justine M. Kasznica