Noncompete agreements come in many different forms, yet they are all meant to accomplish a similar purpose: protect the employer. In an audio conference sponsored by BLR, David Erb, a partner with the national law firm of Fisher & Phillips, outlined what employers should and shouldn't do when it comes to drafting effective noncompete agreements.

What is a Noncompete Agreement?

The term "noncompete" agreement encompasses a number of different restrictive covenants. The most common types are noncompete agreements, assignment of property rights, nonsolicitation agreements, and confidentiality (nondisclosure) agreements.

Noncompetition agreements generally provide that an employee cannot work for the competition or open a competing business for a certain period of time and in a defined geographical area.

Customer nonsolicitation agreements prevent an employee from soliciting an employer's customers, and are most often used in the sales profession to protect an employer's customer base. These agreements are harder to enforce if they cover the firm's entire customer list. However, they are generally enforceable when limited to the employee's customers or the names of customers the employee came to know during his or her tenure with the company. They also can prevent an employee from telling his or her customers that he or she has changed firms.

Employee nonsolicitation agreements are often used to protect a company from a manager that has been hired by a competitor and then attempts to recruit his or her former reports. Employers should consider using these agreements with highly placed individuals or even rank and file employees if employees work in teams.

Confidentiality or nondisclosure agreements are used to protect a company's confidential and proprietary information. These agreements should be imposed on employees at almost any level since nearly all employees will learn or can access a company's proprietary information at some point. The agreement should apply throughout an employee's tenure and beyond. These agreements may be included in an employee handbook or in individual employment contracts.

Drafting an Enforceable Noncompete Agreement

Attorney Erb pointed out a number of things employers should do if they want to create a binding and enforceable noncompete agreement.

Context matters. Noncompete agreements that are entered into as part of an initial employment agreement or separation agreement are generally enforceable. The picture becomes more complicated when an employer wishes to have an employee enter into a noncompete agreement during the course of employment. If this is the case, the employer should offer the employee something of value in exchange for the employee's agreement to the restriction; for instance, a promotion, bonus or stock award.

Tailor the restriction. It is important for employers to think about what exactly they are trying to protect, keeping in mind that it must be a legitimate business interest. In addition, employers must take into account the state(s) in which they operate, as state law varies when it comes to the enforceability of restrictive covenants.

Consider the employee. When considering which restrictive covenant would best protect the employer, it is vital that the employer consider the individual employee's position. Employers cannot place a blanket prohibition on the employee's ability to compete. Rather, an employer should think about what it wants to protect and how that translates

to individual employees. Where does the employee fit into the organization? What is his or her role? What type if information does he or she have access to?

10 Mistakes Employees Make and What Employers Can Learn from Them

Attorney Erb concluded his discussion by point out the most common mistakes employees make when leaving their jobs. Not only may some of these mistakes get the employee in legal trouble, but they can also clue in an employer that the departing employee may be engaging in some suspicious behavior that can harm the employer's interests.

1. Taking business records with them.
2. Telling clients that they are considering leaving the company or are leaving the company.
3. Telling co-workers that they are leaving the company before telling management.
4. Sabotaging records.
5. Granting an exit interview
6. Failing to segregate between private company information and public information.
7. Accessing the office after hours when they do not normally do so.
8. Bad mouthing the firm on the way out.
9. Failing to work until the last minute.
10. Failing to consult an attorney prior to resigning.

While it may seem obvious, employers should specifically instruct new hires not to take any business records or any other company information with them if they ever should leave. If any employer gets wind that an employee is doing any of these things, or if the employee has suddenly or suspiciously resigned (e.g., at 5 p.m. on a Friday), an employer should take some immediate steps to protect itself, including:

• Get the employee to do an exit interview so you can find out about the employee's new job and confirm that the employee has not taken any business records or copies of business records.
• Make sure that the employee has returned all electronic devices and that he or she does not have any company information such as client contact information on their personal devices.
• Supervise the employee's access to his or her office and his or her departure from the building.
• Give the employee a copy of any restrictive covenants to remind the employee of his or her obligations.
• Talk to other employees about the departing employee to find out what they know and if the employee has engaged in any suspicious behavior.
• Disable the employee's access to the premises and your computer system.
• Inspect the employee's files and computer to see if anything is missing.
• Immediately reassign all of the employee's accounts and clients, and have the employee's replacement ask your clients if they have heard from the former employee.

Attorney Erb suggested that employers implement a checklist of what actions to take immediately when employee resigns, and to assign these tasks to a specific employee(s).