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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
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
just top executives.
that generalize. Don’t just bar employees from working at any competing
company. It won’t hold up, says Mendelson. "I’ve seen judges who
say I can’t stop this employee from practicing their trade," he
says. "Judges will look for a hook to let them off, but they will
enforce those covenants when it is apparent that an employee will
share information with a competitor about a former employer."
Be specific about which competitors pose a significant threat so that
you can make a case. "If the wayward employee says `I have to
make a living,’ you can say `but your honor, he can go to many other
the Internet business, the top five competitors are going to change
a year from now," says Mendelson. Employee contracts should be
amended to reflect the changing business landscape so that "it’s
sort of a living organism."
in the contract should be reiterated in the office. "Don’t put
everything under the sun in the contract but fail to treat that information
as confidential in your business setting," says Mendelson.
a noncompete agreement if a person was fired or if there was a hostile
environment in the workplace, says Mendelson.
Given the speed of business, how long can employers legally expect
to bar employees from working for a competitor? Anywhere from two
to five years was acceptable in the bricks and mortar world, but "in
the Internet world, 18 months is an eternity," says Mendelson.
In the fast moving world of the Internet, the courts might look askance
at unreasonable long noncompete contracts. Says Mendelson: "It
hasn’t been litigated yet."
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