Non-Compete and Non-Disclosure Agreements: They Can Be Useful Intangible Assets If You Know How To Unravel and Assess Them….

Michael D. Moberly   October 4, 2012

In today’s increasingly competitive HR environment, prospective and repositionable candidates can be readily identified from virtual pools of global applicants.  But, with increasing frequency, they come to their new position already wrapped in non-compete (NC’s), confidentiality (CA’s), and/or non-disclosure agreements (NDA’s) that have, quite wisely in most instances, become routine requisites to employee hiring (on-boarding) processes.

In western contexts, the rationale underlying non-competes and their first cousins’, i.e., NDA’s and CA’s, is to establish ‘boundaries’ which new hires are legally bound to function for a specified period of time.

In some instances, such employee (contractual) agreements can limit the speed which companies can realize the most contributory value from new hires. That’s due, in part to (a.) the duration, (b.) what’s covered in a NC, NDA, or CA, and (c.) whether there may be multiple (overlapping) agreements in place.   Thus, it’s essential to unravel and assess these agreements insofar as their relevance to the hiring company, and then be able to legally navigate such agreements to avoid, among other things, reputation risks.

Also, in today’s necessarily sensitive HR environment, any cultural, legal, and/or religious contexts embedded in a NC, NDA, and/or CA which could hamper and/or delay a new hires’ eventual contributory value must be sympathetically assessed.

It is true, that some new hires are either purposefully or inadvertently remiss in describing the specifics of previous NC’s, NDA’s, and/or CA’s.  Too, some employees pay insufficient attention to the language in employment agreements or perhaps don’t fully comprehend the legal boundaries which the (agreement) language imposes on their opportunities to pursue employment elsewhere in the future, especially if it is with sector competitors.  Others hold the mistaken impression that the only employee agreement which they are legally bound, are those signed with their most recent employer.

Collectively speaking then, the time and attention devoted to unraveling and assessing prospective hires’ previous employment agreements can mitigate reputation risks, make for more informed hiring decisions, and reduce the probability that potentially problematic employees will be inadvertently hired.  Being on the receiving end of an allegation of violating a non-compete and/or a cease and desist letter can certainly diminish – undermine the contributory value of not only a new hire, but a company’s overall reputation.

Ultimately, the long held adage ‘ignorance is bliss’, carries, in my view, little, if any relevance in today’s virtual and global recruitment and hiring environment.

So, the onus is on every employer, throughout their respective (new hire) on-boarding processes, to not just inquire, but verify the boundaries of any and all employment agreements that may still have an effect on an employee’s contributory status.

Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of this post, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance.  And, I always welcome your inquiry at 314-440-3593 or [email protected]

(Inspiration for this post evolved from a fine piece authored by Molly Joyce and posted in ‘Non-Compete Enforceability, Practice & Procedure, Restrictive Covenants’ on September 28th, 2012.)


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