“Is It Too Late To Implement Restrictive Covenants For My Current Employees?” StrategicCHRO360
Matthew Scully and Allison Hawkins authored an article for StrategicCHRO360, published by the Chief Executive Group, offering insights for employers that do not have restrictive covenant agreements in place but would like to protect their business and assets in today’s era of high turnover and competition for talent.
Restrictive covenants can include non-competes (employee cannot compete usually in a geographic region for a specific time period), non-solicitation of customers, non-disclosure of confidential information and non-poaching agreements of employees. While state law varies, generally employers are not prohibited from requiring that current, at-will employees sign restrictive covenant agreements. However, restrictive covenants must be supported by valid consideration, meaning an employee must receive something of value in exchange for entering into the restrictive covenant. Some jurisdictions consider continued at-will employment as sufficient consideration, but other states do not or have unclear laws. In those states, additional consideration like increased pay, a bonus or a change in title or responsibilities may be required.
Employers will want to consider their options if an employee refuses to sign a restrictive covenant. In the many instances where terminating an employee is not the desired outcome, employers can negotiate with the employee and limit the scope of the covenants or eliminate certain clauses all together. Alternatively, they can incentivize the employee through higher pay or other benefits, or going the other direction, limit their access to information or other perks of employment until they sign.
Scully and Hawkins also detailed steps to protect important assets without restrictive covenants, such as state and federal laws that protect the use and disclosure of trade secrets, such as the Defense of Trade Secrets Act. Most states also impose common law duties of loyalty on employees, meaning the employee has a duty not to act or to agree to act during the period of his employment for persons whose interests’ conflict with those of the employer in matters for which the employee is employed.
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