While many people hired in today’s
market are subject to some post-
employment covenants, that
doesn’t mean an employee sub-
ject to restrictions presents any
more of a litigation risk than a contractually
unrestricted new hire. If problems arise, they
often occur because of a lack of clear commu-
nication, misunderstandings regarding what
property is (or is not) owned by a former
employer or simple but avoidable mistakes in
the departure process. This article will focus
on strategies aimed at reducing the likelihood
that a lawsuit will be included with the new
hire’s onboarding paperwork.
The Basics
Restrictive employment covenants take sev-
eral forms and include covenants restricting the
use or misappropriation of condential informa-
tion, soliciting employees to join a new employer,
soliciting a former company’s clients or custom-
ers, and those that outright ban employment with
a competitor. Unlike most private contractual
provisions which, absent extraordinary circum-
stances, will typically be enforced by the courts
without question, a restrictive covenant will only
be enforced in New York if a court deems it “rea-
sonable.” In this context, “reasonable” means the
covenant (1) is no greater than is required to pro-
tect an employer’s legitimate interests, (2)does
not impose undue hardship on the employee,
and (3)does not injure the public.1
But whether or not a covenant is reasonable
is beside the point absent proof that its enforce-
ment is necessary to forestall unfair competi-
tion: An employer only
has a “legitimate inter-
est” in protecting itself
from competition that is
unfair, not competition
generally.2 While unfair
competition may appear
easier to establish when
an employee joins an
enterprise competitive
with his or her former
employment, other inter-
ests may also satisfy this
standard, such as proof
that an employee’s new
position poses a substantial or documented risk
of disclosure of condential or proprietary infor-
mation or trade secrets, or proof of the poorly
understood and sometimes misapplied “unique”
or “extraordinary” services analysis.3
Advance planning within this framework may
mitigate or even reduce prospective liability when
hiring an employee subject to post-employment
covenants, whether that liability threatens the
newly hired employee or the new employer. Here
is some practical guidance for employers (and
employees), which may be useful in avoiding—or
at least mitigating—claims that an employee (or
the new employer) committed or contributed to
a restrictive covenant’s breach.
Practical Guidance
Hiring is a two-way street. The employee
hired today is the employee who resigned—or
someone else red—yesterday, and who may
be an ex-employee tomorrow. As a result,
employers should treat the playing eld as
level. The hiring practices an employer puts
in place today are the departure guidelines
for the former employee tomorrow. It is a true
mutuality of obligation.
Leave the Family Photos on the Desk. An
employee who removes digital or tangible prop-
erty from a prior employer tempts a nding of
legitimate protectable interest because if prop-
erty is valuable enough to be removed, perhaps
it is valuable enough to warrant condentiality
or trade secret status to merit legal protection.
While clearly there are circumstances where an
employee means an ex-employer no harm when
materials leave the workplace, removing infor-
mation, particularly digital information which,
these days, leaves heavy evidentiary ngerprints
regardless of its transitory nature, is bad practice.
Employees who remove property belonging to
an ex-employer may not only be violating the
rights of the ex-employer, but those actions may
reect poorly upon them.
One approach to this issue is to instruct
prospective employees, at the time a job offer
is made, that he or she should bring nothing
from their former job—including the family
photographs on their desk. The latter gesture,
while it might seem extreme, is an effective way
to communicate to the prospective employee
and his or her soon-to-be former employer
that the employee will take absolutely nothing
VOLUME 250—NO. 52 THURSDAY, SEPTEMBER 12, 2013
JENNIFER B. RUBIN is a member of Mintz Levin’s employ-
ment, labor and benefits section. BRET COHEN and MICHAEL
ARNOLD, partners at the firm, contributed to this article.
WWW. NYLJ.COM
EMPLOYMENT COVENANTS
Proactive Strategies to Reduce
Post-Employment Covenant Risks
By
Jennifer B.
Rubin
BIGSTOCK
