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Employment Agreements and Restrictive Covenants

While New York and Connecticut are both “employment at will states and not “right to work states, many employers still offer employment related contracts to employees, which require a legal review and analysis.

There are a number of reasons why employers will offer a written employment agreement. Hertz Legal, employment lawyer for employers and employees serving New York and Connecticut has drafted, negotiated and reviewed numerous employment agreements ranging from Permanent Employment Contracts, Severance Packages, Restrictive Covenants and Non-Competes, Trade Secret Agreements, Benefit Packages and Fixed-Term Agreements.

What should an Employer include in employment agreements with key employees:

Hertz Legal, NY NJ CT Employment Lawyer for Employers recommends the following:

in addition to clearly describing what the employee is going to do for you (scope of work) and what you are going to do for the employee (the salary), the contract can address many other aspects of the employment relationship, such as:

  • Duration of the job (one year, two years, or indefinitely)
  • Information about the employee's responsibilities
  • What benefits (such as health insurance, vacation leave, disability leave, and so on) the employee will receive
  • Grounds for termination
  • Limitations on the employee's ability to compete with your business once the employee leaves * ( restrictive covenants)
  • Protection of your trade secrets and client lists
  • Your ownership of the employee's work product (for example, if the employee writes books or invents gadgets for you), or
  • A method for resolving any disputes that arise about the agreement. (alternative dispute resolution)
What About Written At-Will Agreements?

When Hertz Legal, NY NJ CT Employment Lawyer for Employers refers to written employment contracts, we mean a contract that limits the employer's right to fire the employee, usually by detailing the grounds for termination or setting a term of employment (for example, one or two years).

Some employers require employees to sign a written agreement stating that they are employed at will -- that is, that they can quit at any time, and can be fired at any time, for any reason that is not illegal. Employers might ask employees to sign an offer letter, handbook acknowledgment, or other document agreeing to at will employment for example. These documents do not limit the employer's right to fire the employee. Instead, they affirm the employer's general right to fire at will.

Advantages of Using Contracts

Employment contracts can be very useful if you want control over the employee's ability to leave your business. For example, if finding or training a replacement will be very costly or time-consuming for your company, you might want a written contract.

Employment contracts drafted by Hertz Legal, employment attorney for employers serving NY, NJ, and CT can lock the employee into a specific term (for example, two years) or require the employee to give you enough notice to find and train a suitable replacement (for example, 90 days' notice). While you can't force someone to keep working for you, an employee is likely to comply with the agreement's terms if there's a penalty for not doing so.

Employment contracts might also make sense if the employee will be learning confidential and sensitive information about your business. You can insert confidentiality clauses that prevent the employee from disclosing the information or using it for personal gain. Similarly, a contract can protect you by preventing an employee from competing against you after leaving your company.

Sometimes, you can use an employment contract to entice a highly skilled candidate to come work for you instead of the competition. By promising the individual job security and beneficial terms in an employment contract, you can "sweeten the deal."

Finally, using an employment contract can give you greater control over the employee. For example, if the contract specifies standards for the employee's performance and grounds for termination, you may have an easier time terminating an employee who doesn't live up to your standards.

Restrictive Covenants

Courts have recently frowned upon non-compete agreements as they tend to restrict a person’s ability to earn an income.

What are the key words that Courts will tend to honor in terms of honoring a non-compete agreement, post-employment Restrictive Covenants can be upheld by the Courts if they intend to restrict the employee’s ability to, directly or indirectly, own, manage, operate, control, be employed by, perform services for, consult with, solicit business for, participate in, or be connected with the ownership, management, operation, or control of either: (a) The Company or its affiliates and to not directly or indirectly induce, solicit, or encourage any employee of the Company to leave his employment with the Company, any contractor of the Company to cease providing services to or for the Company, or any vendor of the Company to cease doing business with the Company.

In addition, Restrictive Covenants can restrict the employee from directly or indirectly hiring or causing to to be hired by any person, entity, or business any employee of the Company who then is employed by the Company or who was employed by the Company within a specified period of time.

Restrictive Covenants can also legally protect trade secrets and proprietary and confidential information of the Company including, but not limited to, processes, customer requirements, pricing techniques, customer lists, methods of doing business, identities and compensation levels of employees in key positions, technical or non-technical information, patents, copyrights, methods, ideas, concepts, designs, inventions, know-how, processes, flow diagrams, operating procedures or instructions, technical drawings, technical presentations, compilations of data, studies, general records, contracts, financial records, accounting records, financial statements, forecasts, projections, budgets, plans (whether business, strategic, marketing or other), other financial information, investor, potential investor, client or customer lists, prospective client or customer lists, vendor lists or other vendor information, sales data, sales analysis, equipment and other assets, prices, cost or profit figures, sources of supplies, pricing methods, personnel and personnel information, and other confidential information which are owned by the Company and/or the Company’s parents, subsidiaries and/or affiliates and regularly used in the operation of their business, and as to which the Company and the Company’s parents, subsidiaries, and/or affiliates take precautions to prevent dissemination to persons other than certain directors, officers, and employees.

Employees who are subject to restrictive covenants may not use in any way or disclose any of the Confidential Information, directly or indirectly, at any time in the future, except in connection with a judicial or administrative proceeding, or if the information becomes public knowledge other than as a result of an unauthorized disclosure by the Employee.

It should be noted that Confidential Information does not include information that was lawfully in Employee’s possession before disclosure to him/her by the Company or before his/her employment with the Company or that is independently developed by Employee without the use of any Confidential Information provided by the Company.

A typically broad restrictive covenant will look like this “The Employee agrees that without the prior written consent of the Company, he/she will not either directly or indirectly: (i) participate or have any interest in, own, manage, operate, control, be connected with as a stockholder, director, officer, employee, partner or consultant, or otherwise engage, invest or participate in any entity that sells, distributes, manufactures or develops Covered Products (as defined below) and that competes, anywhere in the United States or in any other country, with any business of the Company to which employee provided services within a specified period of time or to which Employee had access to Confidential Information; (ii) do any act injurious to the reputation of the Company or that diverts customers or suppliers from the Company, provided however that nothing in this section is intended to bar you from, without notice to the Company, engaging in any of the activities described above or giving testimony pursuant to a compulsory legal process or as otherwise required by law; or (iii) directly or indirectly (including through someone else acting on your recommendation, suggestion, identification or advice), solicit any Company employee to leave the Company’s employment or to accept any position with any other entity.”

Case Study

A client of Hertz Legal, employment attorney for employers serving NY, NJ, and CT. received a cease-and-desist letter from a former employer to cease and desist from taking a new job. The prospective employer also received a cease and desist to prevent them from hiring the prospective employee. Hertz Legal, employment lawyers for employers and employees serving New York and Connecticut communicated with counsel for the Employer that while it is understood that employee originally agreed to wait a period of 6 months before taking a new job, the employee had never been privy to any trade secrets or confidential information and therefore was not jeopardizing the former employer by taking a new job. Had this matter gone to litigation, it would have been long and drawn out. We negotiated a 3-month waiting period, wherein the former employee received a generous severance package for not working during that period. At the end of the waiting period, the client of Hertz Legal, Employment attorneys for employers and employees serving New York and Connecticut was free to work for the new employer.

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