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The court found that the former employer failed to “introduce at trial some evidence tending to show that [employee’s] tortious act was foreseeable as that term is used in vicarious liability law: for example, evidence showing that the risk of employees misappropriating trade secrets is a well-known hazard in the insurance industry.” 648 F. Make the at-will employment offer letter contingent on the applicant’s ability to perform duties; confirm the applicant is not hindered by a non-compete or other agreement with a previous employer. Make it clear in the offer letter that the employee is prohibited from bringing or using OLDCO’s property, trade secrets, confidential information. If you discover a problem (e.g., existing non-compete agreement) up front, evaluate the question of enforceability, and balance the risks before going forward with the hire. Consider limiting the terms of the employment to assure (or at least make a good faith effort to assure) that activities will not conflict with the prior agreement or entail the use of OLDCO’s confidential information, trade secrets, or customer relationships. Determine whether, and on what terms, NEWCO will defend/indemnify the employee. Decide whether NEWCO’s attorney will represent the employee, whether NEWCO will hire separate counsel for the employee, or whether NEWCO will expect the employee to provide for his/her own representation. Have an “exit strategy” (at-will employment, etc.). NEWCO’S Post-Hire Strategies: Say What You Mean; Mean What You Say. E.2d at 1287 (holding employer could only protect its workforce from a raid by a former employee at the location where he worked; clause was not enforceable where former California employee lured employer’s Indiana employees to work for him). An employer can require an employee to assign ownership rights in past and future inventions, and should do so in writing. Existing employees should be provided independent consideration to support such agreements. There are two widely recognized exceptions to the general rule: “First, an employer owns an employee’s invention if the employee is a party to an express contract to that effect; second, when an employee is hired to invent something or solve a particular problem, the property of the invention related to this effort may belong to the employer.” When applying the “employed to invent” exception, a court will examine the “employment relationship at the time of the inventive work to determine if the parties entered an implied-in-fact contract to assign patent rights.” , 83 F.3d 403, 408-09 (Fed. Where a non-compete agreement is executed after an employee has commenced employment, the agreement must be supported by “independent consideration” to be enforceable. Even if an employee has not physically begun to work, but has already accepted an offer of employment, a non-compete agreement following the original offer of employment cannot be enforced absent independent consideration. 20, 1998) (holding non-competition covenant invalid where employee knew before he began working that he would have to sign the covenant, but did not know its terms and conditions until two weeks after his employment began, 2002 WL 31687601 (Minn. The employer should include a proactive clause allowing the employer to assign the non-competition agreement.
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This article summarizes goals and strategies relating to such agreements. The agreement must not impose any greater restriction on the employee than is necessary to protect the employer’s business.
In Minnesota an enforceable non-compete agreement must be both necessary to safeguard the employer’s protectable interests and reasonable as between the parties.
Download pdf of this article Prepared and Presented by: JEFFREY B.
OBERMAN More employers than ever are using non-competition, confidentiality and non-solicitation agreements to prevent unfair competition and solicitation of their employees, and to protect their trade secrets and confidential information. Generally, companies have protectable interests in (1) customer goodwill, (2) confidential information, (3) trade secrets, and (4) customer contacts. 2002) (upholding injunction because former employee’s close contacts with customers constituted a “protectable interest”) (applying Missouri law).
§ 572.08 (2006) makes arbitration agreements enforceable “save upon such grounds as exist at law or in equity for the revocation of any contract.”) If using an arbitration clause, an employer should specifically retain the right to bring a legal action in court against any third party that benefits in any way from the employee’s breach of the agreement.
A new employer who hires an employee who is subject to a non-compete agreement may be liable to the prior employer for tortious interference with contract.
Consider adding provisions to the agreement that put future employers on notice of possible liability for any/all of the above. In addition to providing for money damages in the event of a breach of the non-compete, the agreement should expressly state that injunctive relief would be appropriate in the event of a breach and that irreparable harm would result absent injunctive relief. However, employers should not forget that if an employee successfully proves lack of consideration for a covenant not to compete, which contains an arbitration clause, this would vitiate the entire agreement, including the arbitration clause, and thus the matter would not be arbitrable.
If the employer decides to include an arbitration clause, then the employer should take advantage of the contractual nature of arbitration and craft a specific arbitration clause that maximizes the protection of the employer’s interests. Further, the agreement should either grant the arbitrator the right to provide injunctive relief, or the employer should specifically retain the right to pursue injunctive relief in court.
1999) (invalidating one-year non-compete because “[w]hen measured against the information technology industry in the Internet environment, a one-year hiatus from the work force is several generations, if not an eternity.”); 2005 WL 1620328 (Minn. July 12, 2005) (validating district court’s temporal modification of a non-compete clause from three years to one where a few of vet’s clients followed her to her new clinic, but many stayed with clinic). To the extent they are not, such covenants have not been enforced. Paul metropolitan area for one year was reasonable in terms of time, geography, and scope); , 2002 WL 192564, (D.
Covenants restricting competition must be reasonable from a geographic standpoint as well. 15, 2004) (denying defendant’s motion to stay injunction where noncompete agreement restricting defendant from doing several “restricted activities” in the Minneapolis/St. 23, 2002) (granting TRO because non-compete was supported by consideration and reasonable: period of 12 months, radius of 100 miles).
5 (1982) provides, in part, that “Trade secret” means information .