{2:24 minutes to read} While a loyal employee can be a valuable asset to a company, a former employee, especially one who departs on unpleasant terms, can be a significant threat.
If that employee is in a position of responsibility, they will be privy to trade secrets and financial, customer, and marketing information that can be detrimental to a business if not properly safeguarded. Therefore, businesses would be well advised to have these employees sign agreements at the outset of their employment, in which they agree that they will not disclose trade secrets or confidential information during and after the course of their employment.
Non-Solicitation Clause
Any agreement should also include a non-solicitation clause, preventing employees from soliciting a company’s customers both during the course of their employment and for a specified term thereafter.
Since such conduct may result in irreparable harm to a company, this agreement should also provide the company with the ability to seek and obtain injunctive relief in the event of any violations.
Liquidated Damages Clause
Another option is a liquidated damages clause, which specifies a set amount of compensation to the employer if the employee breaches this agreement. This clause may be useful and enforceable, provided the liquidated damages could be properly quantified in such a way as to not be deemed punitive.
Non-Compete Clause
In certain instances, a non-compete clause prevents an employee from working for a competitor within a set geographic area for a specific time period. The terms must be reasonable in time and area, and not seen as an undue restriction on the employee’s right to make a living. However, there are states such as California that generally deem non-compete clauses unenforceable except in limited circumstances.
In other states, the determination of whether a non-compete is unreasonable is interpreted by the courts on a case-by-case basis. In New York, courts have the ability to blueline an agreement to modify unenforceable provisions.
While an employee agreement with post-employment restrictions can effectively protect a company’s interest, care must be taken to ensure that the agreement is not overly broad and is not seen as an unreasonable restriction on an employee’s rights.
Alan Krystal
Alan H. Krystal, P.C.
631 780 6555
Alan@alankrystallaw.com