C. Enforcement Of Restrictive Covenants

If the employee is an important executive who has acquired confidential trade information or company secrets, try to learn the identity of the company the individual plans to work for. If he/she signed a contract containing a covenant not to work for a competitor or to use confidential information against your company, such information could help you monitor the situation more closely and could be extremely useful.

TIP: The enforcement of post-termination restrictive covenants varies on a state-by-state basis and generally de- pends on the unique facts of each case. Many states, such as New York, have left the issue to the courts for resolution. Other states, including Oregon, Louisiana and Texas, have responded legislatively by enacting statutes regulating the enforceability of such clauses.

Assuming the company can prove that trade secrets or confidential information is involved (which is often difficult because companies often confuse such information with mere general data acquired by the individual from his/her business experience), the company took precautions to guard the secrecy of such data or information, and the time limit and geographic scope limitations of the covenant are reasonable, many courts will enforce confidentiality agreements previously signed by key employees to prevent them from using or disclosing this information. Depending on state law, confidentiality agree- ments should be drafted when dealing with outside companies such as independent research and development firms, subcon- tractors and others with access to confidential information including licensees and suppliers.

Counsel Comment #140: It is generally more difficult to enforce covenants not to compete (such as restricting a key executive from working for a competitor, starting a competing business, or soliciting current or former employees away from your organization) unless the restriction is reasonable in terms of geographic scope and time limitation and a court is persuaded that the request is proper and necessary to protect the interests of your company. Certainly keeping the time re- striction short (i.e., six months or less) and paying the executive additional consideration before the written covenant was signed can enhance your company's chances of success in this area. However, since the law varies so, always speak to experienced counsel before considering the drafting of such clauses in a pre-employment or post-employment agreement.

Efficient exit procedures include taking preventive steps to reduce the dangers of disloyal ex-employees using confidential information against your company. All material (including copies of relevant documents) containing company secrets should be returned before the employee departs. The individual, whether he/she resigns or is fired, should be advised of his/her continuing obligation not to disclose trade secrets and should be requested to sign a document confirming this. When the situation warrants, some companies withhold gratui- tous (not previously earned) severance benefits until they have proof that trade secrets have not been taken and/or conveyed.

If applicable, send both the individual and his or her new employer (your competitor) a letter reminding them of the ex-em- ployee's continuing obligation to secrecy and the fact that a restrictive covenant is in effect. If you learn that this letter is ignored, a cease and desist letter must be sent by counsel advising them of the seriousness of the situation. Strategies such as these can persuade them that it might be risky to violate the covenant and may demonstrate your resolve to fight it out in court if necessary.