With (most of) 2015 ahead, it is an opportune time to continue with our theme of employee non-compete agreements and resolving to review, assess and update your company’s agreements as a critical component of your ongoing and vital asset protection program. It goes without saying that an otherwise good start to the new year can come to an abrupt end when the company learns that a valued employee has “jumped ship” to the competitor because she knew what we didn’t; that her non-compete agreement with our company was outdated and no longer worth the proverbial paper on which it is written.
If your company employs individuals in two or more states, your “starting point” for this project is different (and more complex) from that of the Company which employs individuals in just one state. The underlying premise is one with which you are probably familiar; the laws surrounding the enforcement (or lack thereof) of non-compete agreements are matters of varying state, not federal law.
Assuming your Company has the financial and human resources to draft, implement, monitor and amend non-compete agreements tailored to the specific laws of each state in which it employs individuals, that is likely your best option. State-law tailored agreements which can be monitored and kept current with the ever changing legal landscape undoubtedly increase the likelihood of enforcement – at least in the short term. But, this is a very time consuming and expensive process that often, for legitimate reasons, falls by the wayside. While multi-state employers start out with great intentions and often spend a significant amount of money and time on the front-end of this project, higher priorities take over and these tailored agreements are rarely monitored in accordance with and therefore left victim to ever-changing state laws.
Most multi-state employers take a different route; limiting the number of versions of their non-compete agreements to one or very few. Certainly, from contract management, assessment and enforcement perspectives, one or a very limited number of versions lends itself to a more manageable program. That said, the drafting and enforcement of standardized, multi-state, non-compete agreements can also be a very complex and somewhat treacherous mine field of issues, deserving of a significant amount of managerial and experienced legal analysis on the front-end. Most often, the adoption of this type of “non-compete program” involves a detailed analysis of the laws of the states where employees reside, the duties and titles of the employees who will be asked to execute and similar issues. But, in the end, the multi-state employer has a solid foundation for this component of its asset management program for years to come.
We will expand on this analysis in future articles, taking a closer look at its key components including adequate consideration, blue-penciling laws and the non-compete versus non-solicitation analysis.