Employers who utilize non-compete clauses and other restrictive covenants will inevitably be faced with the departure of one or more employees subject to those restrictions. When such a departure occurs, an employer may face the very real threat that the departing employee will exploit the employer’s confidential information or client relationships for his or her own benefit or the benefit of a new employer. A few practical steps can be taken by the employer to increase the likelihood that departing employees will comply with their post-termination obligations.
First, the employer should determine how the circumstances of the employee’s departure are likely to impact the employee’s restrictive covenants. If an employee voluntarily leaves to pursue another opportunity, the employer should determine whether the employee’s new position or venture falls within the scope of the restrictive covenants. If the employee has been terminated, the employer should keep in mind that this may affect the enforceability of restrictive covenants in some jurisdictions. Courts in some jurisdictions have held that restrictive covenants may not be enforceable against employees who are terminated without cause or for poor performance. In addition, if an employee has been terminated without cause or is not seeking employment that the employer considers to be a serious competitive threat, the employer should consider whether enforcement of the restrictive covenants is necessary. Many restrictive covenants are drafted to give employers the option of releasing employees from the restrictions. Since non-compete agreements often require employers to continue paying a departing employee during the restriction period, foregoing enforcement may be desirable.