Restrictive Covenants: Protect What’s Yours When Employees Leave
Whether you’re hiring new employees, or fending off poachers hoping to steal away your people, restrictive covenants can protect your company’s proprietary assets — and people. Consider the role the following covenants may play in your organization:
- Non-disclosure. These restrict and/or prohibit the use, disclosure, duplication, or dissemination of any confidential information not generally available to the public. This can include intellectual property, sales and pricing data, and customer buying and purchasing information not generally in the public realm, especially for privately-held companies.
- Non-solicitation of customers. When employees leave, they may seek to bring your customers with them; in fact, that’s often what the new employer seeks when they hire talent from a competitor. Florida law allows employers to protect these relationships for up to two years after an employee departs. In the case of high-producing employees in the securities or insurance fields, however, the non-solicitation period may be reduced based on preliminary negotiations with these employees. Additionally, if the employee brought an existing book of business with them, precisely worded carve-outs consistent with Florida law for these preexisting clients might be negotiated between the parties.
- Non-solicitation of existing employees. These agreements can help prevent newly departed employees from soliciting, raiding or poaching former coworkers. Further, carefully drafted No-Contact provisions can assist in situations where the former employee is not directly or indirectly soliciting the clients or the employees, but those clients and/or employees are reaching out to the former employees.
Even in the absence of written restrictive covenants, state and federal laws recognize that employees have both a duty of loyalty and a fiduciary duty while employed. State and federal trade secret acts further protect employers in the event an employee attempts to steal a company's trade secrets.
Restrictive covenants can be put in place at or following initial hiring. Florida law recognizes that continued employment is adequate consideration for an employee entering into restrictive covenants after they have been hired. However, in the event the employer takes the employee to court to enforce the restrictive covenant, providing employees with some additional consideration for having entered into restrictive covenants after-the-fact may be viewed favorably by the court as evidence of additional bargained-for consideration in exchange for a restrictive covenant.
You cannot prevent employees from leaving. But you can protect proprietary data and relationships. Consult with experienced employment counsel to formulate an action plan to do so.