Proactive Strategies to Reduce Post-Employment Covenant Risks

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While many people hired in today’s market are subject to some post-employment covenants, that doesn’t mean an employee subject to restrictions presents any more of a litigation risk than a contractually unrestricted new hire. If problems arise, they often occur because of a lack of clear communication, misunderstandings regarding what property is (or is not) owned by a former employer or simple but avoidable mistakes in the departure process. This article will focus on strategies aimed at reducing the likelihood that a lawsuit will be included with the new hire’s onboarding paperwork.

The Basics -

Restrictive employment covenants take several forms and include covenants restricting the use or misappropriation of confidential information, soliciting employees to join a new employer, soliciting a former company’s clients or customers, and those that outright ban employment with a competitor. Unlike most private contractual provisions which, absent extraordinary circumstances, will typically be enforced by the courts without question, a restrictive covenant will only be enforced in New York if a court deems it “reasonable.” In this context, “reasonable” means the covenant (1) is no greater than is required to protect an employer’s legitimate interests, (2) does not impose undue hardship on the employee, and (3) does not injure the public.

Originally published in the New York Law Journal on September 12, 2013.

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