On December 3, 2014, Bass, Berry & Sims hosted a General Counsel Forum for a discussion of key issues that arise in the drafting and enforcement of restrictive covenant agreements. Attorneys Bob Horton and Stephanie Roth, from the Labor & Employment Practice Group, launched the event by addressing the need to begin with the end in mind. When drafting a non-compete or non-solicitation agreement, what interests is the agreement intended to protect? In what jurisdiction might a challenge to the agreement be brought, often years after its drafting?
After identifying and clarifying its purpose, the agreement can be drafted with precision. The drafter must address, among other issues, the varying jurisdictions in play; the proper time, geographic and activity scope of the restrictions; the adequacy of consideration; and the relationship between the employer's protectable interests and the other party's knowledge, experience and relationships.
The ability to craft an agreement protecting the interests of the employer will be constrained, in part, by the often idiosyncratic requirements of any state law that might ultimately be applied to the agreement to determine its enforceability. To that end, Bob and Stephanie presented examples of the limits certain states impose regarding who can be subject to restrictive covenants and how restrictive covenants must be drafted and executed so as to be enforceable, including the benefits and pitfalls of choice of law and forum selection clauses. A central takeaway from the discussion was that a one-size-fits-all approach can pose significant risks of non-enforcement if implemented across multiple states and job groups. A carefully tailored agreement, though, increases the likelihood of enforcement and may offer more flexibility than initially thought possible in jurisdictions with strict limitations on restrictive covenant agreements.
Video of the presentation, which provides additional information about issues to consider when drafting restrictive covenant agreements and assessing the risk of hiring persons with restrictive covenants arising from past employment, is available here.