Presenting a live 90-minute webinar with interactive Q&A Restrictive Covenants in Employment: Crafting Enforceable Noncompete and Non-Solicitation Agreements WEDNESDAY , OCTOBER 14, 2015 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Mark A. Saloman, Partner, FordHarrison , Berkeley Heights, N.J. Paul E. Starkman, Partner, Pedersen & Houpt , Chicago Jennifer M. Trulock, Partner, Baker Botts , Dallas The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Non-Competition mpetition Ag Agre reeme ment nt for r Rest stricti rictive ve Cove vena nants nts in in Em Empl ployment: ment: Cra rafting fting En Enforce rceable able Non-Compet Compete e and nd Non-Solicitation olicitation Ag Agre reem emen ents ts Stafford CLE Webinar October 14, 2015 Paul E. Starkman Pedersen & Houpt 4
Employment Non-Competes Non-competes for sellers of businesses ◦ Longer duration and broader geographic scope Non-competes between businesses Non-competes for employees of acquired companies ◦ Asset sale v. stock sale ◦ Assignment clauses 5
Stand-alone documents Included in other agreements: ◦ Employment Agreements ◦ Stock Option Agreements ◦ Long-Term Incentive Plans ◦ Severance Agreements 6
Protectable Business Interests ◦ Confidential Information ◦ "Near Permanent" Customer Relationships Long-term contracts v. competitive bidding Fungible products v. custom-built products ◦ Goodwill 7
Defining the Employer ◦ Subsidiaries, parents, affiliates included? ◦ Successorship ◦ Assignability 8
Type of Employee ◦ Specialized knowledge ◦ Customer relationships Level of Employee ◦ Higher level employees ◦ Sales and R&D employees ◦ Lower level employees (the Jimmy John's controversy) Independent Contractors Multi-State Employers (location of employees) ◦ Choice of Law clause ◦ Forum selection clause 9
Define “Competing Business” ◦ Should be based on definition of Employer's current and prospective business (that it has taken substantial steps to engage in). ◦ List of competitors? ◦ Beware of circular definitions Example: "Competing Business" means all businesses that compete with Employer 10
Geographic Restrictions ◦ Tailor to area in which Employer conducts business ◦ Tailor to area in which Employee worked? ◦ National/Global non-competes ◦ Using customer based restrictions instead of geographic restrictions 11
"Working for a competitor in the same or similar capacity" ◦ Courts have refused to enforce non-competes that preclude former employees from working for a competitor "in any capacity" Change in duties 12
Duration ◦ Time to train replacement ◦ Alleviate unfair advantages ◦ Statutory presumptions of enforceability (Florida, Louisiana) Extendor Clauses ◦ Beware of state law on enforceability (Wisconsin) 13
Compare with Traditional Non-Competes ◦ Garden Leave ◦ Deferred Compensation Arrangements Similar Analysis in Some States 14
1) Potential public relations nightmare. 2) Invalidation of one non-compete may invalidate all of employer's non-competes. 3) Uniform Unfair Trade Practices Act violation? 4) Texas employee awarded $750,00 in attorneys' fees for overboard non-compete. 5) Termination for refusing to sign invalid non-compete resulted in employer $1.2 million liability(in California, of course). 15
Paul E. Starkman Pedersen & Houpt 161 North Clark Street Suite 2700 Chicago, IL 60601-3242 312-641-6888 pestarkman@pedersenhoupt.com 16
R ESTRICTIVE C OVENANTS IN E MPLOYMENT : C RAFTING E NFORCEABLE N ONCOMPETE AND N ON -S OLICITATION A GREEMENTS FordHarrison LLP Presented by Mark A. Saloman, Esq. Co-Chair, Non-Compete Practice Group October 14, 2015
P ROTECTING Y OUR D ATA & P EOPLE F ROM U NFAIR C OMPETITION • The Scary Truth: Your most prized assets are unsafe 18
A LTERNATIVES T O N ON - COMPETE A GREEMENTS : O THER C ONTRACTUAL P OST - EMPLOYMENT R ESTRAINTS 19
A GENDA • Drafting Considerations & Best Practices • Non-Disclosure • Non-Solicitation - customers • Non-Solicitation – employees • Non-Interference • Other Options to Protect Trade Secrets & Good Will 20
D RAFTING C ONSIDERATIONS – B EST P RACTICES • Goodwill Assumes Many Forms • Trade Secrets • Confidential Information • Client relationships (created, developed, and fostered through your employees) 21
D RAFTING C ONSIDERATIONS – B EST P RACTICES • Goodwill • Your confidential information / trade secrets 22
D RAFTING C ONSIDERATIONS – B EST P RACTICES • What Are Protectable “Trade Secrets”? 23
D RAFTING C ONSIDERATIONS – B EST P RACTICES • What Is Protectable “Confidential” Information? 24
O THER C ONTRACTUAL P OST - EMPLOYMENT R ESTRAINTS • The Non-Disclosure Agreement • Confidentiality Provisions 25
D RAFTING C ONSIDERATIONS – B EST P RACTICES • What Else Can A Restrictive Covenant Protect? • Corporate “goodwill” 26
O THER C ONTRACTUAL P OST - EMPLOYMENT R ESTRAINTS • Non-Solicitation of Clients/Customers Clause 27
I S T HE “C ONFIDENTIAL I NFORMATION ” R EALLY C ONFIDENTIAL ? • Does former employee have a prior relationship with customer – free to take with him • Information generally available to the public (published on website, internet, social media or trade journal) 28
O THER C ONTRACTUAL P OST - EMPLOYMENT R ESTRAINTS • The Employee Non-Solicitation Clause 29
O THER C ONTRACTUAL P OST - EMPLOYMENT R ESTRAINTS • Non-Interference 30
O THER C ONTRACTUAL P OST - EMPLOYMENT R ESTRAINTS • Notice and Garden Leave Provisions • Paid Consultancy – Transition Arrangements • Additional Consideration – Golden Handcuffs 31
O THER C ONTRACTUAL P OST - EMPLOYMENT R ESTRAINTS • Forfeiture of Economic Rights (Employee Choice Doctrine) 32
O THER C ONTRACTUAL P OST - EMPLOYMENT R ESTRAINTS • Clawbacks • Employee Loans 33
O THER M ETHODS O F P ROTECTION • Written computer/data policies and procedures • Passwords and security measures • Limit access – need to know basis • Label trade secrets as “Confidential” • Conserve your business relationships 34
I NITIAL G OALS W HEN H IRING – T HE “C LEAN H ANDS ” A PPROACH • Prevent confidential information of candidate’s prior employer from coming into your company’s possession • Keep candidate(s) “clean” • Identify legitimate interest of current/prior employer • Trade secret or confidential information • Customer relationships • current • prospective • Specialized training 35
R ESTRICTIVE C OVENANTS IN E MPLOYMENT : C RAFTING E NFORCEABLE N ONCOMPETE AND N ON - S OLICITATION A GREEMENTS For more information, please contact: FordHarrison LLP Mark A. Saloman, Esq., Co-Chair, Non-Compete Practice Group 973-646-7300 or msaloman@fordharrison.com 973-646-7311 or nj-hotline@fordharrison.com October 14, 2015
Jennifer Trulock Baker Botts L.L.P.
Return of property Agreements ◦ Reimbursement ◦ Clawback/Forfeiture ◦ Non-Solicitation ◦ Non-Compete ◦ Non-Disclosure ◦ Intellectual Property Exit interview Reasons for termination Trade secrets 38
Separation Agreement ◦ Focus by EEOC on effective releases ◦ Required by employment agreement? ◦ Non-disparagement ◦ Mutuality of obligations ◦ Litigation/investigation cooperation ◦ Compliance with restrictive covenants ◦ ADEA/OWBPA compliant waivers Check for data removal and copying ◦ Look for suspicious behavior 39
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