Rethinking Noncompete Agreements

Many employers routinely require mid to upper level employees to sign noncompetition agreements, and those can create a variety of problems for the employer and employee. Some states, such as California, oppose noncompete agreements, according to The Howe & Hutton Report. They “blue-pencil” overly restrictive noncompetes, striking or revising certain provisions, while others throw out such agreements in their entirety.

But in one area, state laws seem relatively uniform: if an underlying purpose of the noncompete is to protect the employer’s trade secrets, there had better be trade secrets to protect. Information readily available from public sources such as business directories, trade association lists, Yellow Pages and electronic equivalents, information already known to competitors or to employees from prior work, information not maintained or treated as confidential, all of these undermine an employer’s claim that its information is confidential and should be regarded as trade secrets entitled to protection, regardless of a noncompete agreement’s broad language.

In fact, the broader the claim, the more vulnerable it may be to a challenge that it is not a trade secret at all. Keep that in mind when deciding the real goal of requiring a noncompete agreement. What are you trying to protect, and why? Draft any such agreement within the parameters of your state’s trade-secret and noncompete statutory and common law. S