USA Law and Practice Contributed by: Chuck Baldwin, Ken Siepman, Bonnie Martin and Justin Allen, Ogletree Deakins
this will require limiting the non-compete covenant to performing the same or similar type of duties at a competitive business. A non-compete that seeks to prohibit an employee from accepting employment in any capacity within a particular industry is likely to be found over-broad in many states. If a non-compete is determined to be over-broad in scope, it may be held to be facially unenforceable in many states. In some states, courts have discretion to “reform” the covenant by narrowing it to a reasonable scope. By way of example, if a court determines that a 50-mile non-compete is over-broad, the court may narrow the covenant to a smaller geographic territo - ry. In some other states, courts are strictly limited to “blue pencilling” the agreement by deleting words or phrases, but revisions and additions to the language are not permitted. Regardless of the approach a state takes to curing or invalidating over-broad agreements, employers should generally endeavour to draft their agreements as narrowly as possible while protecting their legiti - mate, protectable business interests. 2.2 Non-Solicits Customer Non-Solicits Like non-compete covenants, customer non-solici - tation covenants are governed by the common law in most states – although some states have statutes limiting their use. Non-solicits must also be tailored to an employer’s protectable business interests and be reasonable in scope. However, because the scope of the customer restrictions defines the breadth of the agreement, most states do not require a geographic restriction for non-solicitation covenants. In general, a customer non-solicit should be limited to the customers the employee had material business contact with and/or acquired confidential information about. Some states require the customer to be an active customer in order to fall within the scope of a non-solicit, whereas others permit non-solicits to extend to active prospects. Employee Non-Solicits Employee non-solicitation agreements must also be reasonable in scope and protect the employer’s legiti -
mate business interests. Protecting against employee departures is typically not considered a protectable business interest, standing alone. Thus, a non-solic - itation covenant that extends to a company’s entire workforce may be unenforceable in some states. Best practice for drafting employee non-solicits is to limit them to employees with the ability to harm the com - pany while working at a competitor (such as those employees with access to confidential information, customer relationships, etc) and those employees with whom the departing employee had material contact. 3. Data Privacy 3.1 Data Privacy Law and Employment Data Protection Laws Employee data protection laws in other countries are often much more restrictive than in the USA. How - ever, the USA is trending towards more data protec - tion obligations, with an assortment of data protection laws that regulate the collection, use and transfer of employees’ personally identifiable information (PII) and health information. These laws are not limited to protecting active employee information, so employ - ers’ obligations extend to former employees, job applicants, independent contractors and other non- employee groups (eg, customers) whose personal information they may obtain. There are a number of federal data protection laws that impact the employment relationship, including: • the Health Insurance Portability and Accountability Act (HIPAA), which governs health plan and medi - cal provider conduct, and dictates the circum - stances under which protected health information (PHI) may be released and to whom it may be released; • the Genetic Information Nondiscrimination Act (GINA), which covers genetic information; • the ADA, which limits when an employer may obtain medical information, how such information may be used and disclosed, and how it may be stored and retained; • the FMLA, which limits the use and disclosure of medical information collected to administer leaves under the law;
716 CHAMBERS.COM
Powered by FlippingBook