Amanda DeMatteis: Hi, Josh.
Josh Goodbaum: Hi, Amanda. What are we going to talk about today?
DeMatteis: I thought we would talk about restrictive covenants, but a little bit differently than we typically do in these videos. Let’s assume a potential client comes to you, and they do not in fact have any post-employment restrictive covenants. But they’re concerned whether or not they have any obligations to their previous employer that they need to continue to meet with a new employer. What are you going to tell them?
Goodbaum: In general, Amanda, post-employment restrictive covenants are a creature of contract, which means if you haven’t signed a contract that promises to do or not do something after the end of your employment, then you’re a free agent. You can do whatever you want. You can go work for whomever you want, you can solicit whomever you want, you can service any clients you want, you can talk with whomever you want.
There are 2 exceptions to this rule, one broad, one narrow, let me cover them. The broad exception is that you have a common law duty not to use the confidential information of your former employer, for your own benefit or anyone else’s benefit. What does that mean? It means, even if you didn’t sign a contract, you have to keep confidential, the confidential, the non-public information that you learned from that employer. You can’t leave your current employer, take all of their confidential information, go to their competitor and say, hey, let’s use this for our own benefit or to undermine the prior employers.
That’s a common law duty to maintain the confidentiality of confidential information. The narrow exception is something called the doctrine of inevitable disclosure. It’s limited to trade secrets. Think of things like the recipe for Coke, or the formula for a prescription drug. If you have worked very closely with trade secrets, it is possible that going to a competitor means that necessarily that trade secret will be disclosed to that competitor. And so courts say, if that disclosure is inevitable, if it is automatic, if there is no way to prevent you from disclosing that trade secret, then you’re not allowed to go to that competitor. You can be prohibited from competing because of the secrecy, the force that we give to trade secrets law.
Trade secrets are so important. These things like the recipe for Coca-Cola or the formula for prescription drugs are so important, that you can be prohibited from competing after the end of your employment, even if you never signed a contract that says you can’t.
DeMatteis: Really interesting stuff, Josh. Thank you for sharing. One other practice tip, Remember to read any severance or separation agreement at the end of your employment really carefully. Sometimes post-employment restrictive covenants are thrown into those, even if you haven’t signed one earlier in your employment. Thank you so much for watching, and we look forward to seeing you next time.