When you hire a new employee, especially someone in a skilled or professional occupation, they become privy to a lot of your company’s valuable confidential information, such as:
- Trade secrets
- Private manufacturing or engineering processes
- Client lists
In order to protect your interests, there are three agreements, all of them restrictive covenants, that you should require them to sign before they begin work at your company. When properly drafted and executed, all three are valid while that person works for your company and even a period of time after their employment ends.
1. Confidentiality Agreements
Confidentiality agreements, which are also known as non-disclosure agreements or “NDAs,” are contracts in which the employee promises to keep specified information confidential and not disclose it without the proper authorization. This information may include:
- Trade secrets
- Client lists
- Financial information
- Products in development
Typical provisions include:
- Clear definitions of what information is confidential and proprietary, and therefore prohibited from unauthorized disclosure.
- The period of time that nondisclosure remains in effect, such as two years or five years. Restrictions that apply indefinitely can be difficult to enforce.
- Situations where disclosure is permitted, such as information that becomes publicly known after the NDA is signed.
If your business has trade secrets, it’s recommended that there be two confidentiality periods specified in the agreement: one of unlimited duration to protect any disclosed trade secrets and the other with specified time periods for all additional confidential information.
2. Non-Compete Agreements
Also known as covenants not to compete, non-compete agreements are intended to prevent a worker from competing with their employer after the employment relationship ends. To be effective, these agreements should seek to protect a legitimate business interest of the employer and specify the following:
- A geographic range where the former employee may not operate a competing business
- How long the prohibition on unfair competition is in effect. Like confidentiality agreements, courts won’t generally enforce an indefinite ban.
Some states won’t enforce non-compete agreements as a matter of public policy, but New York courts will enforce agreements that are reasonable, properly limited, and designed to protect the employer’s business interests, provided the employee entered into it voluntarily.
3. Non-Solicitation Agreements
Non-solicitation agreements are designed to help an employer protect its business interests by preventing a former employee from soliciting its clients and/or vendors. Like non-compete agreements, they should include a specific geographic scope and time frame, as courts are not inclined to enforce “limitless” agreements.
Contact a Business and Employment Law Attorney
Drafting and enforcing restrictive covenants can be difficult, which is why business owners should work with an experienced business and employment law attorney to develop agreements that protect your legitimate business interests in a manner that the courts are not likely to perceive as overreaching.
At Rosen Law, LLC, our business and employment law attorneys have the background and experience needed to draw up and enforce employment-related agreements that protect your rights without unduly impacting a former employee’s ability to earn a living. To schedule a consultation, please contact our office.