Boost Your Legal Documents with Electronic Signature Legitimateness for Non-Solicitation Agreement in United States

How to eSign a document: electronic signature legitimateness for Non-Solicitation Agreement in United States

back in the shanty uh welcome back um the last time we were here we talked about no poaching agreements with brian masternack and brian actually mentioned during that broadcast that there were some other issues we needed to deal with with things like non-compete non-solicited agreements um and he wanted to have somebody smarter than him come and talk about that well i mean that's not that hard of bar to get over so um i did find ed bardelli i don't know if he's smarter than brian but he he's a pretty smart guy in all fairness i've known ed for like 30 years now eddie yeah and we work very closely together because ad in addition to being a fabulous litigator and a member of management at the firm and all that stuff happens to specialize in employment litigation so we share a lot of clients and we do a lot of work together and i will tell you this right now if one of my kids needed a lawyer to save their life this is the guy i would call he's a superb litigator a wonderful lawyer and a great guy and a renaissance fan so say hello eddie thank you steve i would really appreciate that well i i i mean in all sincerity so let's talk about non-competes um you know i i'm not clear here on what the difference between a non-compete and a non-solicited agreement is what are we talking about when we talk about those two things yeah i think it's important for people to recognize the difference between those two things the names may speak for themselves but what i found a lot is with clients who think they've got some sort of a restriction with their employees right an employee leaves and they say well he can't go work there i know there's a restriction somewhere in our agreement they'll take it out and the agreement says i agree not to solicit customers well that doesn't prevent the employee from going to work for a competitor it prevents them from soliciting the customers that they serviced usually while they were at the former employer so you don't really have much to go and prevent the employee from going to work for a competitor vice versa you might think look i don't care if somebody goes and work for a competitor i'm not trying to stop that i just want to make sure that they don't solicit our customers when they leave and lo and behold when you look at your agreements either you don't have something like that or you have a pure non-compete that just says you can't go work for a competitor for a period of time so those two things cover very different topics obviously and judges look at them very differently so if you had for example a non-solicit but you really were worried about somebody working for a competitor it's very difficult to go into a court and ask a judge to stop somebody from working for a competitor with only a non-solicit and the same thing with respect to um a non-compete if you're saying hey i'm willing to have my employee go work somewhere else for a competitor perhaps but i don't want them to solicit customers so it's really important to understand the distinction between those two things and also to make sure that you understand what you have if you think you've got some sort of restrictive covenant with an employee something that stops them from doing something with a competitor that you that you know what it is and that you're up to date on it so so what i'm hearing you say is that the document itself what it really says is super important with respect to how we go forward i take it that's true too of for example i've heard from people in the past well i've got this thing in my handbook it says you know the employee can't do this or can't do that is that good enough is that handbook language going to be good enough when the employee leaves it it's it's hard right because it's not it's usually handbooks will say this is not an employment contract or they have some language in there because you don't want to change the at will status of the employees that you have that's what most employers have in their handbooks so it's very difficult to say i want to enforce a quote-unquote contractual provision in the same document that says this doesn't form an employment contract with the employee you can have those kinds of things in there where you say look you're obligated to do x and this doesn't change your at will status but it has to be worded with that in mind and pretty carefully in order for that to be enforceable if the employee signs it and it's there's a non-computer non-solicit type of language in a quote-unquote handbook you can still enforce it as contractual language but it has to be written in a certain way so the judge doesn't look at it and say you can't have your kick and needed to you can't say you didn't you didn't enter into a contract with the employee but now you want to enforce what you think are some important contractual provisions so either write it a certain way um where it's clear that you're bound by these terms but we're not changing the at will status of our relationship um versus saying this is not a contract period or having some separate document or acknowledgement in a handbook that the employee signed separately so it's clear that they're bound by those obligations okay so what we've got to get is the employee signature on some piece of paper somewhere where they're acknowledging their obligations this doesn't necessarily just happen you know organically that's right with that being said i i mean this week i i know most people aren't looking at this stuff but we're geeks and we look at weird things so all over twitter all over the newspaper the wall street journal blah blah blah the bite administration just issued an executive order and part of it has to deal with this topic the topic of non-competes so did the biden administration's executive order outlaw non-compete agreements or non-solicited agreements that an employer might have with their employee no there was no law passed or anything like that that changed what employers currently would have with their employees or change state law for example so what that did do is it signaled um certainly a public policy shift within um the federal government the the biden administration the federal trade commission how they view non-competes and as brian talked about last week um you know the agreements you know between two different companies we're talking about company's agreement with its own employees um those are still allowed they're still legal and they're still governed by state law so um right now what we're seeing is again sort of a policy shift and we want to be mindful that you know judges keep track of this stuff too um and it could reinforce some judges views that um you know these have to be looked at very carefully or you know maybe their own bias toward not wanting to enforce them to begin with okay so you said something interesting there the judges do you and i know that at least in my experience some judges like these and some judges don't like these things and the draw you get might make a difference so what are some of the best practices that an employer can do to make sure they have the best chance of getting these agreements enforced if they do end up in court yeah those are great points so the point about the judge is really important um it's difficult to guarantee that uh non-compete or non-solicit will be enforced by a court i have actually had the experience with um same client same contract two different judges one enforced it one dude um one thing to understand about non-competes is there there are different kinds of contracts because there's a statute that specifically deals with them so under normal circumstances if someone said i agree to do x and then they don't they breached and you have a breach of contract claim um in the non-compete context an employee can say i agree not to go to a competitor they go to a competitor they technically breach the contract but there's another layer of analysis the judge goes through which is is the non-compete reasonable and that really is what we're talking about when we're talking about how can we put ourselves in the best position to make sure that these are enforceable because one judge could look at something and say the contract reason is reasonable and another judge could look at it and say that doesn't look reasonable to me so how do we get in the best position to do that um one is to actually analyze what do you need to non-compete for is there and this is this is a legal term but it actually works in the real world which is is there a legitimate competitive business interest that you're trying to protect and is it a narrow restriction that you're putting on an employee no judge will just blanket restrict competition they won't just say you can't go work for a competitor for any period of time anywhere it has to have a reasonable relationship to the competitive business interest that you're trying to protect so what category of employees do you want to apply to sales people who have access to customer lists um r d people who have access to um confidential trade secret formulas and that kind of thing those are easier ones to see um having a blanket non-compete that applies to the whole workforce including um janitors or something like that those are a little more difficult for a judge to say even if you're not trying to apply it to a janitor when the person who wants to get out of the non-compete comes into court they're going to say this is just way too broad all you're trying to do is restrict competition it doesn't have a reasonable relationship to the competitive business interest you're trying to protect so look at the category of employee that you're looking to protect yourself against in terms of them leaving for a competitor the kind of information that they're exposed to and tailoring the agreements to those folks that gives you the best chance of having it enforced by any judge so you know we say this all the time as lawyers and you know if you want a form go to right but these really are not one size fits all agreements you've really got to tailor them tight is what i'm hearing you say and think about who you're giving them to and what folder absolutely absolutely okay you can take you take kind of take your chances um but yeah you definitely have to make sure that you analyze how you want them to apply one of the other things that i've run into over my career at is we get we've got current employees and now all of a sudden we decide we want to do something we've got to protect the wood we have no protections in place we have to do something but we're worried about employees not wanting to sign a non-compete or a non-solicit if we don't want to go that far down the road to the non-compete um what what should we be doing to protect our proprietary information what should we be thinking about yeah i think certainly the the best thing to have in place is at least some confidentiality policies and provisions that again that the employee signs off on um a lot of our clients a lot of mutual clients um don't want to go so far as they have employees sign in on computer and non-solicit um maybe it's against their culture could be employee relations issue um now in terms of the workforce that we're seeing where it's been difficult to find employees it could just be a recruiting issue as well um but at the very least uh there should be pretty strong confidentiality provisions that are in the handbook and like i said signed by the employee but what you want to make sure that you do is you define what you know what your confidential information is you define it so it's pretty clear what it is and then you actually keep it confidential so you have to have computer passwords um if you're worried about customer lists only the employees who have a need to know about the customer list should have access to the customer list not the entire company those kinds of things so you can actually show that the information that you um think is confidential is kept confidential by the company and uh most importantly is worthy of protection okay um what if i don't have any of that stuff now does that mean i have no protection at all as an employer if somebody walks out the door with a big file of all my confidential information can i protect myself at all or am i just throwing my hands up in the air and saying oh well that's the way it goes no there are still protections in the law for um for employers um in in michigan and most states there's a uniform trade secrets at um in michigan it's the michigan uniform trade secrets act but it's called uniform because it's modeled after legislation that's out there that most states ascribe to so um that law you don't have to have an agreement in place to enforce or anything like that but what you do have to have again is trade secret information so it's information that the company keeps confidential confidentiality agreements help with respect to that as well but for sure in michigan and many other states those statutes give employers the opportunity to go into court and still get in the type of injunctive relief that you would get with that you get kind of if you had a non-compete in place um to stop an employee from exploiting trade secrets of the company so there's law like that there's other there's other common law out there not in a statute that you could apply employees have a duty of loyalty to their employer um some employees might have fiduciary duties to their employers so there's other things that employers can use if an employee is competing unfairly using confidential information trade secret information or some other information from the former employer when they go to a new employer that would be unfair so what i'm hearing you say is if i haven't got my ducks in a row and got my agreements in place i'm not always not lost but if you really want to protect your stuff you need to have something in writing protecting your stuff you do because the the law that i just talked about the the common law and the trade secrets after those are pretty narrow um a contract parties can they can contract for anything um and the non-compete will definitely cover a broader array of um employees you don't have to prove that you've got a trade secret that's being violated or being taken in order to get the kind of relief that you would only be able to get under the statute so when we go back to looking at making sure the contracts are reasonable and give you the best chance to enforce them it still gives you a broader range more tools in your tool belt to protect your business and to protect your your information from just walking out the door and being used in an unfair way against you perfect well any i can't thank you enough for joining me today um if you guys need anything if you want to talk about these kind of agreements if you've got one you need to have enforced um if you know your information is leaking out the door and you don't know where give out a call give me a call call your warner lawyer we can help you through it thanks very much for joining us everybody and we'll see you in a couple of weeks