Weekly Roundup – Employment Restrictive Covenants – What you Need to Know

EMPLOYMENT RESTRICTIVE COVENANTS, are they fair and legally enforceable?  Employment restrictive covenants generally include non-compete agreements, non-solicitation of customer agreements, and confidentiality agreements.  Contrary to popular belief, most states will in fact enforce these agreements if they are properly drafted; that is, reasonable in time, scope and geographic location.   However, are these agreements fair?  Should you have your employees sign them?  The answer is YES.

CONFIDENTIALITY AGREEMENTS.  Most states that have licensing laws require you and your employees to keep customer information confidential.  So, a confidentiality agreement is not only fair, it is required in many licensing states.   Also, these agreements help to protect the company’s confidential information, such as customer lists, special customer pricing, customer contract expiration dates, books and records, marketing and business plans and other such information that the company would not want in the hands of a competitor.   

NON-SOLICITATION AGREEMENTS. These agreements preclude a former employee from solicitating business from your customers for some period-of-time post-employment (typically 1 to 2 years).   Most states legally enforce these agreements because customers are considered “assets” of the company, no different than the company’s money, furniture, computers, vehicles and other assets.   Just like a former employee cannot take the company’s money, furniture, vehicles and other assets with him upon termination of employment, so too he cannot take or solicit the company’s customers if a proper non-solicitation agreement is place.  Non-solicitation agreements are also important if you ever wish to sell your business someday, as many buyers will insist upon them.

NON-COMPETE AGREEMENTS.  These agreements are the most controversial and difficult to enforce, as they preclude a former employee from working in the industry for some period-of-time and in some geographic location post-employment.  However, if reasonable in time (1 to 2 years) and geographic scope (50-mile radius or so), many courts will enforce them.  That said, most states generally find Confidentiality Agreements and Non-Solicitation Agreements to be fairer, as those agreements do not preclude a former employee from working in his chosen profession; rather, they merely preclude a former employee from using or disclosing confidential information and solicitating the company’s customers.

MICHAEL J. REVNESS, ESQ., is the founder of AlarmLegal.com,  and a founding partner at the law firm of KURTZ & REVNESS, P.C. 

Please contact me at mrevness@kandrlaw.com (or 610-688-2855) if I can be of assistance with the drafting of employment restrictive covenants agreements and security alarm contracts, the purchase or sale of security alarm accounts or other related security industry legal services.

This article is for information purposes only and does not constitute, and should not be relied upon as, legal advice.