We live in a free society, and all businesses (except Montana and limited other exceptions) must abide by the ‘at-will’ employment concept – employees can leave at any time for any reason.
Many employers ask us what they can do from preventing valued or critical employees from leaving (and taking their clients or proprietary information with them). The answer is – not much, unless you have a really good employment attorney.
Let’s review the basic components (adapted from a terrific article by Joseph Shelton of Fisher & Phillips LLP)
A non-compete provision prohibits a departing employee from competing with the former employer after termination. Most states highly restrict their use.
Non-solicitation provisions allow an employee to work for a competitive business, but prohibit the solicitation of specific customers. The employee is free to compete and is free to work in whatever territory he or she desires, so long as the employee does not solicit business from a specific group of customers.
A non-recruitment (or no-raid) clause is designed to protect your employees from being hired away by former employees. Non-recruitment covenants restrict departing employees from trying to take others with them.
A confidentiality (or non-disclosure) provision usually limits the employee’s ability to disclose information learned about customers, suppliers, or the employer’s operations. While non-disclosure agreements often include the term “trade secrets,” most states have a trade-secrets statute that prohibits misappropriation of such information even without a contract.
Return of property
A return of property agreement typically states that the employee must return all company property and all documents related to the company upon termination of employment. While all employers expect their employees to return company property upon termination of employment, there is oftentimes a dispute as to what is company property and what is the employee’s property.
For example, many employees may claim that their rolodex or list of business prospects is their “property,” despite the fact that such information was assembled on company time and with company resources. A return of property agreement may help an employer avoid such disputes by defining via contract what the company considers to be its property rather than the employee’s.
Bottom Line: These agreements are highly legal in nature and should only be implemented with the input and agreement from a qualified employment attorney.