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Restrictive Covenants in a Slumping Economy,[object Object],Michael King,[object Object]
Restrictive covenants,[object Object],Main Types,[object Object],Non Compete Agreements,[object Object],Non Solicitation Agreements,[object Object],Non Disparagement Clauses – severance pay,[object Object],Highly used in Hi-tech and Financial Industries,[object Object]
Purpose,[object Object],Employer Protection,[object Object],Trade Secrets,[object Object],Customer relationships,[object Object],Special Training,[object Object]
Motive,[object Object],Massive Lay Offs ,[object Object],Desperation to Protect Information,[object Object],Fierce Competition among rival corporations,[object Object],Fear of losing some competitive advantage,[object Object]
Economic Conditions,[object Object],Down Sizing,[object Object],Mass Lay Offs,[object Object],Dissolved Companies,[object Object],Unprecedented unavailability of employment opportunities,[object Object],Severance vs. Unemployment Benefits,[object Object],Some clauses still enforceable under both,[object Object],NDA’s and Non Disparaging comment clauses usually attached to severance packages,[object Object]
Non Competes – Enforceable?,[object Object],Geographic Reach,[object Object],Duration – 3 years is usually extreme,[object Object],Define what is confidential information,[object Object],Must not be generally known,[object Object],Starting your own business?,[object Object],Where was the lawsuit filed?,[object Object],Already known information?,[object Object],Victoria’s Secret v Mays Dept Stores,[object Object]
Non Solicitation,[object Object],Often paired with a NCA,[object Object],Client relationship is long,[object Object],The connection with the employee rests solely with the employment of the company,[object Object],Can not be broad (i.e., must not provide services to any client, current, past, and future potential clients?,[object Object],Frieburger v J U B Engineers, Idaho Supreme Court,[object Object]
Court Considerations,[object Object],Value of the information to the company,[object Object],The amount of effort creating the trade info,[object Object],Goodin and Goodin v. Jolliff, et al., ___ S.W.3d ___ (Tex.- App. Fort Worth, 2008),[object Object]
AN exception,[object Object],A Houston Court upheld the non compete for a Vice President – Restricted all of North America.,[object Object],The employer actually named the prohibited competitors .,[object Object]
THE states,[object Object],Not enforceable in California,[object Object],California is a pro-employee state. ,[object Object],The statute declaring noncompetition agreements invalid has been on the books since the 19th century.,[object Object],Can use non solicitation/NDA to protect trade secrets and client lists and employees,[object Object],Employers can work around by effecting pensions and distributions as allowed by ERISA – will it supersede California law?,[object Object]
The states,[object Object],Texas – still a question,[object Object],Alabama – upholds the strict statues according to reasonableness.,[object Object]
Legal Hurdles,[object Object],Courts value the right to earn a living,[object Object],Need a good business reason,[object Object],Calling it a trade secret is not cause,[object Object],Not to punish the employee for leaving,[object Object],Must not,[object Object],last too long ,[object Object],cover too wide a geographic area, or ,[object Object],prohibit a former employee from engaging in too many types of businesses. ,[object Object]
Dissolved Companies	,[object Object],California disfavors all Non Competes,[object Object],National companies will have to recognize this precedent, i.e. Edwards vs. Arthur Andersen,[object Object]
Final Advice,[object Object],Used only when Business interests are at stake,[object Object],Not broader than necessary to protect those interests,[object Object],Signed before employment begins or with additional consideration provided –promotion, etc.  ,[object Object]

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Restrictive Covenants

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Editor's Notes

  1. Insert picture of black man drinking a beer