Steering clear of 3 common legal ‘accidents’
The intersection of law and business has produced some pretty impressive collisions. But by keeping your head up you can easily avoid a fender-bender. Here are a handful of the more common legal misunderstandings we see in our firm’s business practice.1. Are non-compete agreements enforceable? They can be, and often are. Further, a new employer can be on the hook for an employee’s violation of the non-compete with the former employer.Generally, the validity of a non-compete agreement is covered by the following broad principles: • It must be no greater than necessary to protect the employer’s legitimate interests. • It cannot impose an undue hardship on the employee. • It cannot injure public interests.Further, in order for a non-compete to be valid, it must either be presented prior to the employee accepting the position, or with additional consideration for the employee if presented after the employee has accepted the position.Non-competes can be very effective when done right. Conversely, they can be completely useless and unenforceable when done poorly. The trick, of course, is to draft a good one originally and be able to recognize a bad one when threatened with litigation.2. Employee X is terrible. Is it impossible to fire an employee these days? You likely can. New Hampshire is an employee at-will state, which means an employee can be fired at any time for any reason not prohibited by law, absent a contract to the contrary.In order for an employee to successfully challenge a termination as a wrongful discharge, the discharge must be motivated by bad faith or malice and the discharge must be contrary to public policy.Public policy covers a broad range, but the obvious categories include any termination based on race, gender, age, sexual orientation, physical or mental disability, marital status or religious creed. The most common “bad faith” motivation cases are claims based on a theory that the termination was retaliation against the employee for some previous, protected act.A protected act includes an effort by the employee to secure a safe working environment or an employee’s request to be paid overtime when it’s due.Considerations to be aware of when deciding to exercise your right to terminate an employee include: • Do you have a good faith, performance-based reason to support the decision? If not, is your reason for the termination based on either of the two elements needed to support a wrongful discharge claim? • Does a contract exist – either actual or implied – that limits the employee at-will relationship? • Is this termination (or this employee) being treated differently than other, similarly situated employees in the past?Terminating an employee is a significant action, and it should be done carefully and consistently. When done appropriately, an employer can greatly reduce its exposure, and the potential for time and money draining litigation.3. Without a signed non-disclosure agreement, I have no protection for my trade secrets, right? Chances are, you are protected.Whether it’s the original recipe for Coke or simple pricing formulas, most businesses have information they don’t want shared with competitors. The state Uniform Trade Secrets Act provides businesses with statutory protection from unauthorized disclosures, even without a signed agreement. In short, the statute provides protection against former employees or agents who disseminate your trade secrets without permission.Two considerations are critical in determining whether you qualify for this protection: • Is it a “trade secret?” A trade secret is simply defined as information that derives independent economic value from not being generally known or readily ascertainable by others. • Was the information subject to reasonable efforts to maintain its secrecy? Examples of reasonable efforts include keeping information password protected, not available online or elsewhere to the general public, keeping the information in a secure place, or not disclosing the information without permission or authority.Assuming you satisfy the above considerations, a former employee may not leave your employment and leverage his knowledge of your trade secrets with a rival business even without a separate non-disclosure agreement.Statutory penalties include attorney fees, injunctive relief, and even a reasonable royalty from a third party which knowingly used such trade secrets to its economic benefit.The corner of Business and Law is a busy intersection. Watch the lights, look both ways and use your blinkers. But even if you do find yourself exchanging insurance cards, know that there may very well be protection available to you and your business. It helps to look ahead.Scott M. Fogg, an attorney with law firm of Shaheen & Gordon whose practice includes business and civil litigation, may be reached at email@example.com.