Non-Disclosures and Non-Competes – The 5 Great Myths
Non-disclosure and non-compete clauses seem to proliferate across all sectors of corporate America…and beyond. What are they, and can they really be enforced?
Myth: Non-disclosures cannot be enforced.
Non-disclosures most definitely can be enforced. Typically, this type of provision will cover a variety of “confidential information”. NDAs are more likely to be enforced against information that is described with specificity and already understood to be protected (e.g., trade secrets, other intellectual property, employee data, or a company’s relationship with its vendors and customers (“good will”).
Myth: NDAs will impede the ability to compete and solicit business.
NDAs (by definition) cover the disclosure of information. While NDAs can prevent counterparties from competing based on information exchanged, courts generally disfavor broader limitations on employee mobility. Unless good will or trade secrets/confidential business information is at stake, an employer generally cannot prevent an employee from leaving to go to a competitor. However…
Myth: Non-compete provisions cannot be enforced.
While non-competes cannot protect against ordinary competition, they can be used to prevent unfair competition (involving misappropriation of good will or confidential business information). Courts will often enforce non-competes that are (i) necessary to protect certain employer interests, (ii) reasonable in time and scope, (iii) consistent with public interest and (iv) supported by valid consideration.
Myth: Universally use an NDA with effective non-compete provisions.
The unnecessary and overly-broad use of non-competes may negatively impact a company’s ability to enforce such an agreement when it really matters. If every employee from the night janitor to the CEO is expected to sign a noncompete, a court may question whether any protectable interests are truly at stake.
Myth: NDAs and non-competes use standard language. One size fits all!
NDAs and non-competes are industry and client-specific; the lack of tailoring could lead to unenforceability. (Consider, for example, a geographic or durational restriction that is ill suited to the industry or contractual language that is unenforceable in a given jurisdiction.)
Use a subject matter expert to have the best shot at enforceability. The Wallenstein Law Group will ensure that your agreements are clearly-worded, precise, and effective.
We would be happy to discuss ensuring that you maximize protection for your most valuable company assets and safeguard its ability to compete. Please call or write us today!