Small business owners understandably may be reluctant to use non-compete agreements for many reasons.  The desire to divert precious resources to paying an attorney to prepare a contract is hardly appealing.  Similarly, businesses may feel that such agreements are unnecessary because they have few employees.  But as Ben Franklin once wisely advised, an ounce of prevention is worth a pound of cure. 

The term “non-compete agreement” technically refers to a contract that preclude a person from engaging in certain acts of competition for a prescribed period of time within a prescribed geographic area.  In common usage, however, the term often is used more broadly to refer to any contract by which someone has any type of competitive restrictions, including non-solicit, non-recruit, non-disclosure and confidentiality agreements.  Simply put, non-competes come in all shapes and sizes, but the reasons small business owners should use one or more of these covenants are equally diverse.

1. Enhance the value of your company if you think you may sell someday – If you think someday you may wish to sell your business, it is important to protect the value of your company by requiring employees to sign restrictive covenants.  When someone purchases a business, they want to know that they will get what they pay for.  If they believe key employees with access to customers and relationships may not stay on board after a merger or acquisition, they may balk at the price or even walk away.  You may think that you can always sign employees up to a non-compete later, but such afterthought covenants present their own challenges.  You can protect the value of your company and its assets by using appropriately tailored non-compete agreements.

2. Qualify for trade secret protection – Generally speaking, any valuable business information that you try to keep secret from competitors is subject to trade secret protection.  But to state the obvious, to be a trade secret, the information must in fact be secret.  When determining whether information should be entitled to trade secret protection, courts look at many factors including the extent to which the owner of the secret took reasonable steps to preserve its secrecy.  A widely recognized precaution includes requiring employees to agree not to use or disclose confidential information.  In addition, if customer information is a trade secret, a covenant not to solicit customers (i.e., a non-solicitation agreement) may well be appropriate.

3. Protect your customer relationships –Small businesses tend to place client relationships in the hands of fewer employees.  Consequently, when an employee resigns, the client relationship may walk out the door with the employee.  Just as importantly, you may need time to rebuild your clients’ confidence and to show that your other employees are equally capable of serving their interests.  Clients are the lifeblood of any business; but this is particularly true for small businesses.  A small business simply cannot afford to lose its clients. 

4. Enhance client confidence – Would you do business with a company if you felt your personal financial information was at risk?  Of course not.  Your clients feel the same way.  If your clients entrust their personal or business information to you, they want to know that your employees are not going to take it when they leave.  Requiring employees to sign restrictions on their use and disclosure of confidential information is a good way to make your clients confident that their data is safe in your hands.

5. Protect your investment in training – Training employees is a worthwhile expense, and the training resources you provide may even help you to attract talented employees.  But steps should be taken to prevent your competitors from swooping in to hire your employees after you invest the time and expense to train them.  For this reason, courts commonly recognize that employers have a legitimate interest in protecting their investments in specialized training.

6. Clarify expectations with employees – Do your employees realize that you expect them to leave behind the information you entrusted to them if they decide to move on to a new job?  Do they understand that the relationships you paid them to cultivate and maintain belong to you?  The best time to clarify expectations with your employees is before a dispute arises.  Doing so may influence a departing employee’s conduct and provide you with the leverage you need to protect your company.

7. Shape ground rules for potential litigation – Litigation against departing employees can be expensive, but when your business is on the line, you may have little choice but to protect your interests through legal action.  Although no contract can eliminate the expense associated with litigation, careful forethought can help to minimize your costs.  Restrictive covenants are a perfect opportunity to reach agreement with employees about some of the ground rules that will apply if litigation becomes necessary, such as whether you are entitled to recover attorneys’ fees and costs if you prevail, whether lawsuits should be filed in a local forum, and whether you are entitled to certain remedies such as an injunction or liquidated damages.

8. Deter competitors from hiring your employees –  Deterring competitors from hiring your employees is not a sufficient fact in and of itself to warrant the imposition of a restrictive covenant.  In fact, courts will not enforce restrictive covenants if they serve no purpose other than to restrict competition.  But assuming you have a legitimate purpose for requiring employees to sign such agreements – such as a need to protect confidential information or customer relationships – sending a message to your competitors that you are prepared to protect these interests is a nice side effect.

In short, there are advantages to using non-compete agreements that may not be apparent until it is too late.  Small business owners should think about protecting their business in advance.  Please let me know your thoughts in the comment section below.

Every now and then, non-compete and trade secret plaintiffs conclude that the need for relief is so urgent that a temporary restraining order is not enough.  Instead, they decide that relief must be granted by the court before notice and an opportunity to be heard is provided to the defendant.  This practice, which is legally known as seeking relief ex parte, is permitted by courts, but subject to a specific showing of need that is discussed in greater detail below.  A recent decision by the United States District Court for the Northern District of Texas illustrates that courts are loathe to grant ex parte injunctions.

To be clear, non-compete and trade secret cases are emergency driven.  From a plaintiff’s perspective, the defendant’s wrongful conduct threatens irreparable harm.  To prevent such harm, plaintiffs seek injunctive relief by way of (1) a temporary restraining order (“TRO”), and/or (2) a preliminary injunction.  A TRO is simply an expedited, temporary form of preliminary injunctive relief.  By seeking a TRO, a plaintiff is essentially telling the court that its need for relief is emergent.  As the Florida Supreme Court once stated, “relief delayed is relief denied.”  Capraro v. Lanier Business Products, Inc., 466 So.2d 212, 212 (Fla. 1985).

A case recently filed and decided illustrates that plaintiff must think carefully before seeking ex parte relief.  In Digital Generation, Inc. v. Steven Boring, the plaintiff sought an ex parte TRO against its former employee, Steven Boring.  According to Digital Generation, Mr. Boring had breached, or was about to breach, a non-solicitation and confidentiality agreement.  To support its claim, Digital Generation stated that Mr. Boring joined a competitor and visited a third party who provides a large volume of services to one of Digital Generation’s clients.  Digital Generation also stated that prior to leaving, Mr. Boring asked for permission to access a folder on his laptop computer to retrieve personal information, and it was subsequently discovered that the same folder contained alleged confidential information.

The court discussed the difference between a TRO and a preliminary injunction.  A TRO is “simply a highly accelerated and temporary form of preliminary injunctive relief.”  The purpose of a TRO is to preserve the status quo and prevent irreparable harm “so long as is necessary to hold a hearing, and no longer.”  The court noted that a TRO may be granted on an ex parte basis, but only if the plaintiff alleges specific facts under oath that clearly show that immediate and irreparable harm will result before the defendant may be heard, or if the plaintiff certifies its efforts to provide notice and why notice should not be required.

Against this backdrop, the court proceeded to construe Digital Generation’s allegations in a light favorable to the absent defendant.  The court observed that 44 days had elapsed since Mr. Boring had accessed his laptop computer, and it concluded that the passage of time belied the plaintiff’s assertion that ex parte relief was required.  The court also explained that many of the plaintiff’s allegations were “speculative” and not sufficient to establish its burden at this stage of the proceedings.  After reaching these conclusions, the Court denied the motion without prejudice, and directed Mr. Boring to respond to the motion “within 14 days after the deadline to file an answer or otherwise respond.”  In other words, Mr. Boring was given a minimum of another 35 days after service of the complaint and summons to respond to the motion.

The takeaway from this case is that non-compete and trade secret plaintiff’s should resist the temptation to seek ex parte relief.  Although such relief is sometimes appropriate, courts are loathe to proceed in this fashion without a specific showing of why ex parte proceedings are warranted.  A review of Digital Generation’s motion suggests that its basis for ex parte relief was nothing more than its allegation that Mr. Boring engaged in wrongful conduct.  Although it is impossible to know for sure, it seems likely that Digital Generation could have obtained a more expeditious consideration of its motion if it had simply made prompt service and asked the Court to scheduled an expedited hearing.  Such a hearing may well have taken place within days.  Instead, Digital Generation will now have to wait over a month unless it can find a good faith basis to renew its motion for a TRO.

A copy of Digital Generation’s motion and the court’s order are available below in pdf format.

Michael R. Greco is a partner in the Employee Defection & Trade Secrets Practice Group at Fisher & Phillips LLP.  To receive notice of future blog posts either follow Michael R. Greco on Twitter or on LinkedIn or subscribe to this blog's RSS feed.

 Digital Generation's Motion.pdf (72.78 kb)

Order Denying Digital Generation's Motion for TRO.pdf (161.98 kb)

If there is one thing that non-compete and trade secret plaintiffs and defendants can agree upon, it is that injunctions need to be clear.  If an injunction is going to preclude someone from doing something, it is best if they know exactly what they can and cannot do.

In federal court, this requirement comes directly from Federal Rule of Civil Procedure 65(d), which states that every injunction must, among other things, state its terms specifically and “describe in reasonable detail – and not by referring to the complaint or other document – the act or acts restrained or required.” 

This means it is not sufficient for a court to merely enjoin a defendant from using or disclosing, for example, the “trade secrets described in the plaintiff’s complaint.”  Nor would it be sufficient to preclude a defendant from “using ‘confidential information’ as that term is defined in defendant’s employment agreement.”  This does not mean that a court needs to specifically list each and every discrete piece of information that is the subject of the order.  Rather, it simply means that a party required to comply with an injunction must be able to determine from the words of the injunction what he can and cannot do, or what he is required to do.

This prerequisite recently played a role in an appellate court’s decision to vacate an injunction written by a district court.  Namely, in IDG USA v. Kevin Schupp, the United States Court of Appeals for the Second Circuit reiterated that a “party enjoined must be able to ascertain from the four corners of the order precisely what acts are forbidden."  (A copy of the Court's decision is available in pdf format below.)  The problem with the injunction at issue before the Second Circuit was that it simply prohibited the disclosure of trade secrets or confidential information, with no additional description of what secrets or confidential information were to be protected. 

Accordingly, the Second Circuit remanded the case to the district court with instructions to add additional specificity. The Second Circuit noted that the district court could cure the defects by tracking the words of the non-compete agreement, which defined trade secrets and confidential information. The Court reasoned that although an injunction may not incorporate extrinsic documents by reference, it can track language from such documents in order to add specificity to the injunction.

Vague language in injunctions often comes about for two reasons.  First, some courts simply enter injunctions in a form proposed by the parties.  Lawyers in injunction cases are sometimes working long days at a fast pace and sometimes fail to give their proposed orders careful consideration.  While there is nothing wrong with a court signing off on a proposed order, if a proposed order is going to become a court order, it must still nonetheless comply with the requirement of Rule 65 in terms of its specificity.  Vague and ambiguous language often proves to be ineffective and will likely be insufficient to support a finding of contempt.

Another factor that sometimes gives rise to imprecise injunctions is a party’s legitimate concern about further disclosure of trade secrets through litigation.   In other words, trade secret plaintiffs struggle with the tension between wanting to specify what trade secrets may not be used by the defendant, on the one hand, while not wanting to spell out those very same trade secrets to a party they do not trust, on the other hand.  This tension is not new and courts around the country have generally held that plaintiffs must specifically identify the trade secrets at issue.  This means that trade secret plaintiffs may have to actually disclose what trade secrets they believe the defendants misappropriated, and not just in a summary, descriptive fashion. (See You Just Stole My Trade Secrets.  Want Some More?)  It does, however, not mean that the details of those trade secrets need to be listed in a publicly available injunction.

Michael R. Greco is a partner in the Employee Defection & Trade Secrets Practice Group at Fisher & Phillips LLP.  To receive notice of future blog posts either follow Michael R. Greco on Twitter or on LinkedIn or subscribe to this blog's RSS feed.

IDG v. Schupp.pdf (20.70 kb)

Can employees avoid preliminary injunctions because they are not as wealthy as their employers?  A recent federal court decision says “No.”

Standards for Injunctive Relief

Seasoned (and even not-so-seasoned) litigators are well familiar with the “four factors” that courts commonly consider when deciding whether to enforce a non-compete by way of an injunction.  Namely, (1) whether the party seeking injunctive relief is likely to succeed on the merits; (2) whether the party seeking injunctive relief will be irreparably injured by denial of the relief; (3) whether granting injunctive relief will result in even greater harm to the nonmoving party; and (4) whether granting the injunction will be in the public interest.

Balancing the Burden on Employees with the Benefit to Employers

When opposing requests for injunctions, employees often point to the burden imposed by the restrictions at issue and argue that the burden imposed outweighs the benefit to the employer.  In making this argument, employees sometimes focus on the disparate financial standing of the parties.  In essence, employees sometimes argue: “I am small.  The company is big.  Therefore, the burden on me will necessarily outweigh the benefit to the company.”  This argument was recently rejected by a Pennsylvania federal court in Centimark Corporation v. Donald Lavine.  The Court noted:

“In cases involving restrictive covenants, the harm to the employee ‘almost always seems greater than the harm to the company. . . . [T]he employee, as an individual, apparently will have a hard time financially surviving if he is out of work. By this superficial calculus, the harm to the employee is always greater.’ That said, ‘the numerous courts that have specifically enforced non-compete covenants against the employee have concluded that, regardless of the relative wealth of the employer and employee, the harm to the employer trumps the harm to the employee.’"

In reaching this conclusion, the Lavine court recognized that it was balancing the burden to the employee with the harm the employer would suffer in the absence of an injunction: “Despite his assertion of hardship, a preliminary injunction would not prevent Lavine from working. He could work for Great Lakes or another roofing firm outside the Detroit market, or in sales in a different industry in Detroit. As such, the Court cannot conclude that the harm to Lavine would outweigh any benefit to CentiMark.”

Some employees conflate this analysis with irreparable harm and suggest that their comparatively larger former employers cannot possibly be irreparably harmed.  But various courts have rejected this approach as well.  For example, in Ruscitto v. Merrill Lynch, the United States District Court for the Northern District of Texas held:

“The court rejects the facile temptation simply to compare the corporate employer with the individual former employee and to balance the harm only with reference to their correlative financial standing. To do so would almost always dictate a ruling against the corporate behemoth. The proper equation is surely otherwise, balancing instead the terms and breadth of the injunction contemplated against the threatened harm if equitable relief does not issue.”

The Ruscitto court’s conclusion was hardly surprising given that it was following appellate precedent.  Namely, in Merrill Lynch v. Stidham, the United States Fifth Circuit Court of Appeals rejected as “specious” the “argument that because Merrill Lynch is a large concern, the injury is miniscule.”  According to the Fifth Circuit, “[o]ne cannot be certain, but the success of Merrill Lynch may well be attributable to its diligence over the years in holding parties to the contracts that they freely executed.”

The rationale employed by the Ruscitto and Stidham courts is not rooted in the fact that Merrill Lynch was involved in each case.  In Quaker Chemical Corporation v. Varga, the United States District Court for the Eastern District of Pennsylvania noted that “in a[n injunctive] case such as this, the harm to the employee almost always seems greater than the harm to the company. The employer, as a company-in this case, a very successful company, it appears-will be able to financially survive an employee's leaving for a competitor. And the employee, as an individual, apparently will have a hard time financially surviving if he is out of work. By this superficial calculus, the harm to the employee is always greater.”  Against this backdrop, the Quaker Chemical court concluded that “regardless of the relative wealth of the employer and employee, the harm to the employer trumps the harm to the employee.”

The “take-away”  from these decisions is that when courts assess the enforceability of a restrictive covenant, they may be more swayed by arguments other than the “correlative financial standing” of the parties.  Courts are more likely to focus on whether the covenant is reasonable in light of the legitimate interests of the employer, and whether the employee will face any undue burden.  Courts will likewise factor into their analysis the extent to which all of the harm caused by a breach can be reduced to dollar damages.  When drafting restrictive covenants, employers should therefore focus on whether their covenants are reasonably tailored to protect their legitimate interests.  Defendants should stand ready to attack covenants as overly broad, and they should seek to demonstrate that damages are readily calculable.  As the case law suggests, the outcome is apt to vary on a case by case basis.

Michael R. Greco is a partner in the Employee Defection & Trade Secrets Practice Group at Fisher & Phillips LLP.  To receive notice of future blog posts either follow Michael R. Greco on Twitter or on LinkedIn or subscribe to this blog's RSS feed.

A Philadelphia County state court judge recently issued a preliminary injunction in favor of a law firm against a former associate enforcing a 60-day notice provision.  In doing so, the Court ruled that the former associate could not work elsewhere for 60 days and could not solicit his former employer’s clients.  If the decision is upheld and/or followed by other courts, it provides ammunition for employers to argue that notice provisions are not tantamount to non-competes.  Employees frequently argue that notice provisions may not be enforced because courts may not compel employees to work for an employer as such an order would run afoul of the Constitutional prohibition on involuntary servitude.  While that may be true, the injunction recently issued by the Philadelphia court reflects a possible appetite among the judiciary to prevent former employees from shirking their notice obligations without consequence.

Factual Background

Kline & Specter, P.C., is a personal injury law firm with offices in Pennsylvania, New York and New Jersey.  Robert F. Englert, Jr., Esquire, is a former associate who joined K&S straight out of law school.  During a preliminary injunction hearing, K&S’ counsel argued that Englert should be held to the terms of an employment agreement that required him to provide 60 days notice.  According to K&S, Englert should be precluded from working anywhere but K&S for the duration of his notice provision.  K&S reasoned that Englert failed to provide information needed by the firm to continue representing its clients.

The Court observed that K&S’ request sounded an awful lot like a restrictive covenant.  Such agreements are generally not enforceable against lawyers.  In fact, most states have adopted ethical rules similar to Rule 5.6 of the Model Rules of Professional Conduct that make it unethical for lawyers to make, or even offering to make, an “agreement that restricts the right of a lawyer to practice after termination of the relationship….”  

Over the years, courts and bar associations have interpreted these rules to prohibit the enforceability of restrictive covenants against lawyers.  For example, in Illinois, an appellate court held that non-competes are unenforceable against lawyers because they run afoul of the public policy embodied in Rule 5.6.  Dowd & Dowd, Ltd. v. Gleason, 181 Ill.2d 460, 481 (1998).  More recently, a New Jersey advisory committee on professional ethics rejected the use of agreements that try to restrict who a corporate counsel may represent after leaving the company.

Just how the Philadelphia Court managed to overcome its trepidation about K&S’ agreement is unclear.  Not long after the preliminary injunction hearing began, the courtroom was closed to the public and the record was sealed because Englert allegedly attached a copy of a disciplinary complaint to his filings.  Under applicable Pennsylvania rules, such complaints are to be kept confidential.  While one may speculate that K&S’ confidentiality concerns could have been addressed by something less than a complete sealing of the record, it is hard to determine exactly what measures would suffice given the secrecy surrounding the hearing. 

The docket entry, however, reflects the Court’s preliminary injunction.  (A copy is available in pdf format below)  According to the Court, K&S has a clear right to the relief it was seeking, and it stood to suffer irreparable harm and loss in the absence of such relief.  On this basis, the Court ordered Englert to (1) comply with all provisions of his employment agreement; (2) refrain from affiliating with a law firm or otherwise obtain employment other than with K&S (except as permitted in the employment agreement); and (3) not solicit K&S clients.  By its terms, the order remains in effect until September 5, 2011, or until the Court rules otherwise. 

Michael R. Greco is a partner in the Employee Defection & Trade Secrets Practice Group at Fisher & Phillips LLP.  To receive notice of future blog posts either follow Michael R. Greco on Twitter or on LinkedIn or subscribe to this blog's RSS feed.

Kline Spector v Englert.pdf (31.42 kb)

Previously, we have written about the Top Ten Things to do When an Employee Resigns to Join a Competitor and the Top Ten Mistakes Made by Departing Employees.  Given the favorable feedback, we continue with the following Top Ten Things to Consider When Drafting a Non-Compete  Agreement. 

1. Tailor restrictions to the jurisdiction in which employees work or reside.   In some states, an overly broad non-compete clause can be fatal because courts will refuse to enforce the entire agreement even if the non-compete is slightly overbroad.  In other states, courts will “blue pencil” overly broad provisions (i.e., simply strike the offending language).  Still, other state courts will modify overly broad language to make it enforceable.  If you are drafting agreements in a multi-jurisdictional context, generally a handful of versions – a few for “problem” states and others for “typical” states – will account for most variations in the law.

2. Include choice of law & venue provisions.  Many employers are tempted to choose the law and venue of the state where they are incorporated or headquartered.  If this requires the application of law contrary to the public policy of the state where the employee works or resides, or if it requires an employee to defend an action far from home, these provisions may not be honored.  In many instances, tying the choice of law and venue provisions to the state where the employee works or resides is a good choice because it may spread the risk of negative court decisions and minimize the chance that the choice of law or venue provision will be rejected. 

3. Tailor the contract to the employee’s position.  A common refrain among courts is that a non-compete or non-solicitation agreement must be no more burdensome than necessary to protect a legitimate interest of the employer.  Legitimate interests commonly recognized by courts include confidential information, goodwill, and/or unique training.  Tailoring the duration, scope, and geographic restrictions of the covenant to the particular position and circumstances of the employee (or category of employees) is likely to enhance the enforceability of the agreement.
  
4. Determine what constitutes sufficient consideration for the covenant.  Virtually all states agree that covenants executed prior to the start of employment are supported by consideration (note, however, some states say that an agreement is not supported by consideration if it is executed after the offer is accepted by the employee).  Other states hold that if execution of the agreement is followed by a substantial period of continued at-will employment, the employment will suffice as consideration.  But other states require specific, additional consideration for agreements signed after the start of employment. 

5. Determine what type of restrictions most appropriately protect the company.  Do you need a non-competition, non-solicitation of customers, non-solicitation of employees, non-disclosure provision, or all four?  Identify the legitimate interests that you seek to protect, and choose a restraint suited to protect each interest.

6. Include provisions regarding injunctive relief.  Consider including clauses providing for a presumption that any harm done is irreparable and difficult to quantify, and consenting to injunctive relief.  Including such a clause rarely makes injunctive relief a certainty, but the absence of such a clause can hurt even more.

7. Consider an attorneys’ fee provision.  You may be able to increase your leverage with a clause providing that the company will be reimbursed for reasonable attorney’s fees and costs in the event litigation is required to enforce the covenants.   However, be aware that some jurisdictions may not enforce a one-sided provision that purports to award fees only to the employer.  Some jurisdictions may convert such a provision to a “prevailing party” provision, meaning that the “loser” is required to pay the other side’s fees.  

8. Require return of confidential documents and information.  Contracts should require employees to return any information or documents relating to the company upon request or within a short time after their termination.  Don’t forget to cover copies, derivations of company documents, and information contained on electronic devices, such as cell phones, blackberries and the like. 

9. Include an assignability provision.  Many states will not enforce a restrictive covenant when the identity of the employer has changed (e.g., by an asset sale) unless an agreement includes a consent to assignability.  Where the jurisdiction permits and/or requires such a provision, make clear the company may assign the covenant to an affiliated company or successor in interest without notifying the employee.  Defining the "Company" at the beginning of the agreement to include the company, its successors and assigns is also a good idea.

10. Include language extending the term of the covenant in the event of a breach.  If the jurisdiction permits such a restriction, make sure your contract states that the period of the covenant is automatically extended for any time during which it was being violated. 

Many employers with offices or employees located in multiple states use the same non-compete/confidentiality agreement in each state in which they do business.  Typically, the form of the non-compete/confidentiality agreement originated in the employer’s home state, and the employer went on to use this same agreement wherever the employer does business.  However, these employers may find out too late that a non-compete/confidentiality agreement enforceable in their home state may not be enforceable in another state.

State law on the enforceability and interpretation of non-compete/confidentiality agreements differs from state to state, and what is entirely reasonable in one state may be viewed as entirely unreasonable—and unenforceable—in another state.  If you do business in multiple states and want to effectively protect your customer good will and confidential and proprietary information, we recommend that you review the enforceability of various provisions of your non-compete/confidentiality agreements under the laws of each of the relevant states.

There are many ways in which relevant laws, and courts’ views, differ in various states on the enforceability and interpretation of non-compete/confidentiality agreements.  Some of the more important variables include—but are not limited to—what constitutes adequate consideration, whether the court will edit or amend an overbroad agreement to bring it within permissible state law restrictions, the extent to which an employer may enforce an agreement against an employee terminated without cause, and whether the court will grant injunctive relief in addition to liquidated damages.

Consideration:  All agreements must have adequate legal consideration to be enforceable.  Courts in some states hold that consideration for a non-compete/confidentiality agreement does not exist—and therefore that the agreement is not enforceable—unless the employer provided separate monetary compensation or the parties entered into the agreement at or near the inception of employment.  On the other hand, courts in other states hold that continued employment by itself (even without separate monetary compensation) is an adequate form of consideration that will support enforcement of a non-compete/confidentiality agreement.

Editing an overbroad agreement:  Courts in some states will amend or edit an overly broad non-compete/confidentiality agreement to bring it into compliance with state reasonableness requirements, while courts in other states will not.  The approach can vary from state to state, with courts in some states following a strict blue pencial approach (i.e., striking unenforceable, severable language), while other states permit courts to exercise their equitable discretion to modify covenants.  Still yet, courts in other states may decline to enforce the entire agreement even if only one term or provision is slightly overbroad (e.g., geographic scope).

Termination without cause:  State law—and court temperament—varies on the issue of enforceability when an employer terminates an employee’s employment without cause.  Courts in some states refuse to enforce restrictive covenants against employees who have been separated from employment through no fault of the employee.

Injunctive Relief/Liquidated Damages:  Many non-compete/confidentiality agreements contain both liquidated damage and injunctive relief provisions.  Courts in some states will not grant injunctive relief if the agreement also contains an enforceable liquidated damages provision.  In this view, an adequate “legal” remedy exists in the form of monetary damages, and therefore equitable relief in the form of an injunction is not be available.

If you have employees in multiple states, and you want to effectively protect your legitimate business interests against employee defections to competitors, you should take steps to tailor your non-compete/confidentiality agreements to ensure that they will be enforceable to the greatest extent permitted in each state in which you do business.