Maintaining Compliant Restrictive Covenant Agreements
For years, there has been a steady trend at the state and federal level to try to chip away at contractual protections companies commonly rely upon to protect investments in confidential and trade secret information, R&D, talent, employee training and education, and relationships with clients and other business partners. What began as a targeted attack on overuse of post-employment non-competes with lower-income workers has greatly expanded.
In the face of these unrelenting attacks, multijurisdictional companies have understandably struggled to implement compliant and effective restrictive covenant agreements. That struggle is partly the result of the dizzying patchwork of existing and new state laws and the threats of further state and federal action. But corporate culture has also contributed to the struggle, with some companies operating under an outdated or dismissive view of the import of these new laws and trends. At the other end of the spectrum are companies engaging in what they view as a tactical retreat, when, in fact, they are yielding unnecessary ground. In reality, many of these new laws are not intended to apply retroactively to existing agreements with employees, so companies can take a deep breath and focus on compliance going forward.
This article will address how companies can effectively tackle the current hodgepodge of state laws and future laws by considering some of the main compliance issues, undertaking a strategic reset, and remaining vigilant going forward.
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“Maintaining Compliant Restrictive Covenant Agreements,” by Kevin M. Passerini was published in Bloomberg Law Professional Perspectives on January 2022. Reprinted with permission.