Corrections or additions?
This article by Melinda Sherwood was published in U.S. 1 Newspaper on November 10, 1999. All rights reserved.
Non-Competes For All
An employer’s greatest fear is that his or her right
hand man or woman walks out of the office with company secrets and
heads straight for the nearest competitor. Most companies have taken
adequate precautions in the form of employee contracts to prevent
that from happening, but in today’s start-up world, everyone is a
possible traitor, says Jedd Mendelson, an attorney at Grotto
Glassman and Hoffman at 75 Livingston Avenue in Roseland. “Employers
would be foolhardy if they did not make it practice that lower level
people have an employment agreement — not what the salary is,
but that they not go to competitors,” he says. “Internet start-ups
may have a person for six months. Then they walk out with a lot of
intelligence about how a company is formulating its business plan.”
Noncompete contracts for all is one way employers can protect their
sensitive information, says Mendelson, one of speakers at “Managing
the Risks of Employee Litigation,” a seminar offered by Grotta
Glassman and Hoffman on Tuesday, November 16, at 8:30 a.m. at the
Woodbridge Place Sheraton in Iselin. The seminar covers everything
from harassment to disabled employees. Call 973-992-8400. Cost: $75.
Employers typically reserve the “noncompete” contract for
upper level executives, but in the contemporary business world, power
is not always at the top of the pyramid, says Mendelson, a principal
at the Grotto firm for the last nine years. “From an employee’s
perspective, why deprive yourself of the opportunity to exploit your
own talent and information?”
Mendelson cites the common example of a scientist who suddenly asks
“why the hell am I working for this guy?” and then leaves
with all the company’s knowledge assets in his head to start his own
company. “A noncompete would preclude him from doing exactly that,”
he says. “With all this E-Commerce and speed with which things
happen today, employers really need to think about what information
is sufficiently important that they want to truly insure that their
personnel do not take it with them or utilize it competitively against
them.”
Mendelson grew up in Brooklyn, where his father spent 49 years working
in the state’s department of auditors. A family friend tipped him
off to Cornell’s industrial and labor relations school, where he received
his BA in 1979, and from there he went to University of Michigan for
a law degree. He now lives in Montville with his wife and two children.
“In the E-Commerce world, everyone is so intricately involved,
that as a proprietor you’d be a fool not to bind someone down,”
says Mendelson. When drawing up a standard employee contract, he advises
employers:
Stretch employee covenants to the entire work force, notjust top executives.Delineate your top competitors in the contract ratherthat generalize. Don’t just bar employees from working at any competingcompany. It won’t hold up, says Mendelson. “I’ve seen judges whosay I can’t stop this employee from practicing their trade,” hesays. “Judges will look for a hook to let them off, but they willenforce those covenants when it is apparent that an employee willshare information with a competitor about a former employer.”Be specific about which competitors pose a significant threat so thatyou can make a case. “If the wayward employee says `I have tomake a living,’ you can say `but your honor, he can go to many othercompanies.'”Update contracts at the “speed of business.” “Inthe Internet business, the top five competitors are going to changea year from now,” says Mendelson. Employee contracts should beamended to reflect the changing business landscape so that “it’ssort of a living organism.”Don’t blow hot air. The attitudes about security expressedin the contract should be reiterated in the office. “Don’t puteverything under the sun in the contract but fail to treat that informationas confidential in your business setting,” says Mendelson.Also, be on your best behavior. Courts typically won’t enforcea noncompete agreement if a person was fired or if there was a hostileenvironment in the workplace, says Mendelson.Given the speed of business, how long can employers legally expectto bar employees from working for a competitor? Anywhere from twoto five years was acceptable in the bricks and mortar world, but “inthe Internet world, 18 months is an eternity,” says Mendelson.In the fast moving world of the Internet, the courts might look askanceat unreasonable long noncompete contracts. Says Mendelson: “Ithasn’t been litigated yet.”Next StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
