Rey - You Can('t) Take it With You

There are some things employees shouldn’t take with them when they leave…

proprietary or confidential information, customers, and other employees.

YOU CAN(‘T) TAKE IT WITH YOU.

Jennifer C. Rey, Esq.SPHR, GPHR

Tuesday, August 31, 20104:15 p.m. to 5:15 p.m.

or CAN YOU?

A Non-Compete Dilemma

AGENDA

ROIs – Learning Objectives

Restrictive Covenants

Elements of an Enforceability

How Employers Can Protect Themselves

Questions

ROI’s

Understand the purpose of non compete, non- solicitation and non-disclosure/confidentiality agreements.

Identify the basic components of non-compete, non-solicitation and non-disclosure/confidentiality agreements.

Determine for what jobs employers should require non-compete, non-solicitation and non- disclosure/confidentiality agreements.

DisclaimerThe content of this presentation is not intended to be legal advice; that can only come from a qualified attorney who is familiar with your organization and with all the facts and circumstances of a particular, specific case and the relevant law.

Restrictive CovenantsWhat is a restrictive covenant?

A restrictive covenant is an agreement to restrict or limit a person’s current or future conduct.

Are they enforceable?

So long as the covenant not to compete complies with the requirements of Fla. Stat. §542.335, it may be enforced by the injunctive powers of the court. Supinski v. Omni Healthcare, P.A., 853 So.2d. 526 (Fla. 5th DCA 2003).

Types of Restrictive Covenants

Non-compete covenants.

Competitors.

Market area.

Non-solicitation covenants.

•Customers.

•Employees.

Non-disclosure/confidentiality covenants.

Service commitments.

Restrictive CovenantsA restrictive covenant not supported by a legitimate business interest is unlawful and is void and unenforceable. Fla. Stat. §542.335(1)(c).

To be enforceable restrictive covenants must be:

•Supported by a legitimate business interest;

•In writing and signed by the person against whom enforcement is sought; AND

•Be reasonable as to:oTime;oArea; ANDoLine of Business

Legitimate Business Interest

What is a legitimate business interest?

How would you define?


Trade secrets.

•Information including a program, device, method, technique, or process that:

oDerives independent economic value,

ofrom not being generally known to, and not being readily ascertainable by proper means,

oby other persons who can obtain economic value from its disclosure or use; and

oIs the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Fla. Stat. §688.002(4).


Valuable confidential business or professional information that otherwise does not qualify as trade secrets.

Substantial relationships with specific prospective or existing customers, patients or clients.


Customer, patient or professional goodwill associated with:

•An ongoing business or professional practice, by way of trade name, trademark, service mark or “trade dress;”

•A specific geographic location; or

•A specific marketing or trade area.

Extraordinary or specialized training.

Signed WritingStatute requires a writing.

Signed by the person against which enforcement is sought.

Loss or unintentional destruction of written document did not affect validity of the agreement provided the court is satisfied as to the essential terms. Environmental Services, Inc. v. Carter, 9 So.3d 1258 (Fla. 5th DCA 2009).

ReasonableWhat is “reasonable”?

According to Webster’s dictionary:

•Being in accordance with reason; not extreme or excessive, but moderate or fair.

ReasonablenessRestrictive covenants must be reasonably necessary to protect legitimate business interest.

Restrictive covenants cannot be overbroad, overlong or otherwise not reasonably necessary.

In determining reasonableness, the could should weigh an employer’s interest in preventing competition against oppressive effects on the employee. Miller Mechanical v. Ruth, 300 So.2d 11 (Fla. 1974).

Reasonable As To TimeGenerally

•Six months or less is presumed reasonable.

•More than two years is presumed unreasonable.

Trade Secrets

•Five years or less is presumed reasonable.

•More than ten years is presumed unreasonable.

Rebuttable presumptions.

Reasonable As To AreaDistance.

Geographic .

City.

County.

State.

Region.

Country.

Specific marketing area.

Reasonable As To Line of BusinessJob function.

Occupation/profession.

Industry/Competition

Market Area

ExamplesA non-compete agreement restricting a doctor from practicing medicine within 100 mile radius of any clinic operated by medial practice was not overbroad, where the clinics were located in a confined area within a county and the doctor could have working in any other county. Supinski v. Omni Healthcare, P.A., 853 So.2d 526 (Fla. 5th DCA 2003).

ExamplesRestrictive covenant was deemed reasonable when the restriction was for a two-year period and only prohibited solicitation of former employer’s customers, including actively sought customers with whom former employees dealt or about whom former employees obtained confidential information due to their association with employer. Milner Voice and Data, Inc. v. Tassy, 377 F.Supp. 2d. 1209 (S.D. Fla. 2005).

ExamplesNon compete was enforceable against former employee to prohibit him from working for a direct competitor where the former employee acquired confidential information including data about clients, pricing, employee training and business operations while working for former employer as senior consultant, project manager, project director and then VP responsible for overall service delivery. Proudfoot Consulting Co. v. Gordon, 2009 WL 2256016 (11th Cir. 2009).

ExamplesNon compete was enforceable against former employee where during employee’s tenure with employer he became intimately familiar with all aspect of employer’s business including pricing, cost structure, customer contact information, setting profit margins and overhead on specific jobs, financial information, engineering drawings and specifications and future plans. Hasley v. Harrell, 971 So.2d 149 (Fla. 2nd DCA 2007).

Enforcement

Against third parties.

•A court that enters an injunction enforcing a non-compete agreement can enjoin others who were not parties to the non-compete agreement; however, those non-parties must receive notice and have an opportunity to be heard. Leighton v. First Universal Lending, LLC 925 So. 2d 462 (Fla. 4th DCA 2006).

Enforcement

By successor owners.

•Success owner of employer could not enforce non-compete clause of employment agreement entered into by prior owner where agreement did not expressly provide the agreement could be enforced against/or by assignees. Marx v. Clear Channel Broadcasting, Inc., 887 So. 2d 405 (Fla. 4th DCA 2004).

Enforcement

Restrictive Covenants not enforceable in all states or countries.

•California

•Texas

•Florida

Forum or venue clauses.

•Establish jurisdictional contacts.

Enforcement

In determining enforceability of a restrictive covenant, a court:

•Shall not consider any individualized economic or other hardship;

•May consider whether or not the person seeking enforcement no longer continues in business in the area or line of business.

Enforcement

•Shall consider all other pertinent legal and equitable defenses.

•Shall consider the effect of enforcement upon the public health, safety, and welfare.

How Employers Can Protect Themselves

Inquire of applicants whether or not they have signed a non-compete with prior employers.

Discuss and secure restrictive covenant commitments during pre-hire negotiations.

Customize restrictive covenant agreements to the specific job, specific market area, specific customers.

Communicate restrictive covenant obligations regularly.

Protecting Trade Secrets

May 9, 2004 SHRM Online Poll

51% had employees sign nondisclosure agreements.

35% remind departing employees to protect trade secrets.

30% take no steps to protect trade secrets.

19% have a written policy to protect trade secrets.


May 9, 2004 SHRM Online Poll (cont’d)

13% developed procedures for reporting trade secret violations.

11% trained employees on laws prohibiting disclosure of trade secrets.

9% punished violations of trade secret policy.

9% trained employees on trade secret definitions and protections.


May 9, 2004 SHRM Online Poll (cont’d)

7% monitored employee communications for trade secret violations.

7% required new employees to sign agreement not to disclose prior employer’s trade secrets.

In Brief**“A one-size-fits-all non-compete agreement won’t pass a judges inspection.” by Stephen Richey, HR Magazine, Sept. 2006.

Restrictive covenant agreements should be used sparingly.

Restrictive covenant agreements should only be used for those employees who present a genuine competitive threat.

Restrictive covenants should only have narrow restrictions that are no greater than necessary to protect the employer’s legitimate business interests.

Questions? & Follow Up.

Thank you for your investing your time with me this afternoon.

Jennifer C. Rey, Esq.SPHR, GPHR

[email protected] Hogan Law FirmPost Office Box 485

Brooksville, Florida 34605P. 352-799-8423F. 352-799-8294

www.hoganlawfirm.com

Rey - You Can('t) Take it With You

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Transcript of Rey - You Can('t) Take it With You