When Are Restrictive Covenants Enforceable?
Employers increasingly require noncompete, nonsolicitation and nondisclosure clauses as a condition of employment or continued employment; as a condition to receiving bonuses, benefits or compensation; or as part of a severance agreement. It is important to understand and negotiate the language and scope of a restrictive covenant before signing an agreement that binds you to such obligations.
Noncompete agreements limit an employee’s ability to work for a competing company. They may be entered into at the beginning of employment, as a condition of continued employment or as part of a severance agreement for a period of time post employment. They are only enforceable to the extent necessary to protect an employer’s business interests and must be limited in geographic and temporal scope in order to be enforceable.
Nonsolicitation agreements are designed to restrict an individual from soliciting a company’s clients and employees. Like noncompete agreements, courts enforce nonsolicitation provisions to the extent that they are limited in temporal and geographic scope and are no broader than necessary to protect a company’s business interests. New York courts often refrain from enforcing a nonsolicitation provision with regard to prospective clients or with regard to clients who, without the employee’s solicitation, voluntarily contact the former employee and seek to retain his or her services.
Nondisclosure agreements prohibit a former employee from misappropriating certain proprietary information from a former employer. Only information that is truly proprietary or confidential is protected. Courts determine whether information is truly proprietary based on whether disclosure of such information would give the new employer an unfair advantage over the former employer. An example of protected proprietary information is an employer’s customer lists.
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