Employment Contract Issues

Question 1

What is a Noncompete agreement?

Answer 1

A noncompete agreement prevents an employee from competing against his former employer.

Question 2

What makes a noncompete agreement valid?

Answer 2

To be valid, an NCA must be ancillary to the employment agreement.

Question 3

How do courts decide whether to enforce a noncompete agreement?

Answer 3

Courts generally follow a 3-step process;

1. Employer must have a legitimate interest
   
   • legitimate interest will be found when the
     employee has gained some advantage
     that he may unfairly use to compete
     against his former employer.
2. The restriction must be reasonable:
   -reasonable in geographic scope, time and
   not against public policy. 2 years is
   considered reasonable time.
3. There must be adequate consideration
   -NCA’s only enforced if they are supported
   by adequate consideration. In IN, an offer
   of employment is valid consideration.
4. Blue Pencil Doctrine
   -even if the agreement is initially found to
   be unenforceable, a court might be able to
   strike offending provisions if the provisions
   are separable from the main agreement.

Question 4

What is a Nondisclosure Agreement (NDA)?

Answer 4

Agreement signed by employee as part of employment to not disclose employer’s internal confidential information.

Question 5

True or False: Courts implement the same analysis used to determine the enforceability of NCAs to determine the enforceability of NDA’s.

Answer 5

True (legitimate interest and reasonable)

Question 6

What are Nonsolicitation Agreements?

Answer 6

An agreement by the employee that he will no solicit the employer’s customers if the employee leaves employment. Employer must have a legitimate protectable interest int he list of customers. Past clients with whom the employer had not contact with during employee’s tenure or future clients are not a reasonable restriction.