Restrictive covenants (whether employee non-solicitation agreements or client/customer non-solicitation agreements) must be reasonable in time. Ideally, a company/business is able, through a reasonable time limitation, to rebuild its customer relations that the departing employee had with its clients. Generally speaking, both employee and client/customer non-solicitation periods tend to last from six to twenty-four months. However, past research from publicly filed executive employment agreements, such as one from the Practical Guidance searchable database called Market Standards–Employment Agreements, has shown that the most prevalent time limitation for both employee and client/customer non-solicitation agreements is one year.
To continue this discussion, we have hammered on “Defining Confidential Information” as the third key consideration for every employer when drafting client/customer non-solicitation agreements.
Defining Confidential Information
In our blog post titled “The 5 Key Clauses For Every Confidentiality Agreement,” we mentioned that in layman’s terms, a confidentiality agreement is a pact, usually written, that parties sign on to protect the integrity, privacy, or secrecy of any information shared or matters being discussed and agreed upon. We also asserted that some of the information that may be considered confidential information includes, but is not limited to, a company’s financial records, customer information, business deals or investments with other partners, employee records, and payrolls.
This goes without saying that every employer has the legitimate interest to protect such information at all costs and make sure that the other party doesn’t use it without your approval or outright steal it. One thing to note is that most jurisdictions do not consider publicly available information or general knowledge about clients/customers or the business that was acquired by the employee during their employment to be regarded as confidential information. Therefore, as a best practice, anything that is constituted as confidential information should be carefully and exhaustively defined in every client/customer non-solicitation agreement.
For instance, a client/customer non-solicitation agreement that categorically defines confidential information may be something like “It is recognizable and agreeable that the Employee, following his or her employment with the Company, will be provided confidential information, such as records of clients for the Company. However, since such information would provide the Employee the ability to cause irreparable harm to the Company and have an unfair competitive advantage, the parties recognize that the restrictions on the Employee’s post-employment conduct are necessary and reasonable. Accordingly, this confidential information includes, but is not limited to, knowledge of client challenges, needs, strategies, decision-makers, preferences, current products, and any and all other non-publicly accessible and available information about the clients of the Company and learned by virtue of employment and the position of the Employee in the Company.”
In Part VIII of this series, we shall move the discussion forward by hammering on “Defining the Protectable Interest with regards to the Employer’s Confidential Information and Client/Customer Goodwill,” as the fourth consideration that every employer must consider when drafting valid client/customer non-solicitation agreements that would be deemed both reasonable and enforceable under the law.
In the meantime, stay tuned for more legal guidance, training, and education. In the interim, if there are any questions or comments, please let us know at the Contact Us page!
Always rising above the bar,
Isaac T.,
Legal Writer, Author, & Publisher.