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Drafting International Restrictive Covenants

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Drafting International Restrictive Covenants

  1. 1. NEW YORK CONNECTICUT 3 Park Avenue 191 Post Road West New York, NY 10016 Westport, Ct 06880 212-245-1000 203-363-7888 www.outtengolden.comDRAFTING INTERNATIONAL RESTRICTIVE COVENANTS*Wendi S. Lazar, Esq. When drafting restrictive covenants—particularly confidentiality and trade secret restrictions where global enforcement is important—understanding the considerations relevant for a U.S. or foreign court in enforcing these provisions is critical. The scope of any restrictions, as with any contract, will depend on the interest of the parties. Counsel for employers will want broad protections. Employee counsel (if there is an opportunity for negotiation) typically want more freedom of movement and flexibility for their clients. Some general observations are appropriate for both:  OVERBROADNESS. A practitioner should avoid drafting restrictions that are overly broad.  LEGITIMATE BUSINESS INTERESTS. Information should be targeted for protection only if the employer can show that without protection, legitimate business interests will be compromised.  SPECIFICITY. Drafting to limit restrictions to only what is necessary to protect the information or trade secret at issue may both give the employer greater protection and the employee greater flexibility in obtaining new employment.  KEY EMPLOYEES. In most foreign jurisdictions, noncompetition provisions should be reserved for key employees who have access to highly confidential information or trade secrets.  SET-OFFS. Clear and unambiguous noncompetition provisions containing set-offs for garden leave periods may ultimately both prevent a noncompetition provision from being found prima facie void or illegal and limit the burden on the employee.  GEOGRAPHY. The geographic and temporal scope of the restriction should be limited to what is absolutely necessary to protect the employer from unfair competition (as opposed to competition in a general sense).  TIME. The period of time for the restrictive covenant to be enforced should be reasonable where you are seeking enforcement. Anything over a year is likely questionable even with consideration, unless the employee in question is a key or other highly specialized employee. In the case of trade secrets, the protections can be broader than for restrictive covenants.  NO-HIRE. No-hire provisions in nonsolicitation clauses will likely be considered noncompetition provisions in jurisdictions that void noncompetition agreements. Again, employers should craft nonsolicitation provisions narrowly to avoid entire provisions being found illegal and non-enforceable.  LOCAL LAW. Be aware of local laws in regard to privacy rights and draft confidentiality provisions that don’t conflict with the data protection laws in a particular jurisdiction or violate the employee’s privacy. In
  2. 2. fact, depending upon whether the practitioner is representing employees or employers, it may be prudent to use a different choice of law or jurisdictional provision for post-employment restrictions from that which is being applied to the rest of the employee’s agreement.  DUTY OF LOYALTY. To ensure that an employee understands his or her duty of loyalty, specifically include “exclusivity of service” provisions to ensure that during employment the employee is not allowed to compete with the employer or start his or her own business. Also consider compensation for this covenant if the jurisdiction in question does not have statutory or common law post-employment duty of loyalty obligations.As companies become increasingly global, and information and technology cross all borders, companies areincreasingly motivated to include post-employment restrictions in employment agreements that attempt to preventemployees from going to an international competitor and from taking or misusing confidential information.However, this must be balanced with the employees’ right to privacy and the value placed on employees’ personalautonomy and personal choice. In the end, it is essential for counsel to understand these concerns when draftinginternational restrictive covenants. Wendi S. Lazar, Partner & Co-Chair of the Executives and Professionals Practice Group at Outten & Golden LLP, has been practicing law since 1993 in many areas of employment law, with a focus on representing employees in the negotiation of executive employment agreements, non-competition and severance agreements, and multinational employment issues. She also advises clients and attorneys concerning employment-related immigration and international law. Ms. Lazar regularly lectures on employment issues to bar associations and industry groups and has had numerous legal articles and book chapters published. She recently co-authored "Restrictive Covenants and Trade Secrets in Employment Law: An InternationalSurvey", published by the Bureau of National Affairs, Inc. (BNA) and previously co-authored "Employees’ PrivacyRights in the Digital Age" published in the April 2010 edition of the New York Law Journal. Ms. Lazar is Chair of theNational Employment Lawyers Association’s Executives and Professionals Committee and a member of its NewYork affiliate, in addition to actively participating on a number of other ABA and NYSBA committees. Martindale-Hubbell recognizes Ms. Lazar as an AV “Preeminent” rated attorney, the highest such attorney rating available.*Reproduced in part from CONFIDENTIALITY, TRADE SECRETS, AND OTHER DUTIES AND RESTRICTIVE COVENANTS IN AGLOBAL ECONOMY – A COMPARATIVE OVERVIEW OF THE TREATISE by Wendi S. Lazar, Outten & Golden, LLP, New York, NY andGary R. Siniscalco, Orrick, Herrington & Sutcliffe LLP, San Francisco, CA with assistance from Katherine Blostein and Lauren Schwartzreich,associates, and Walter Gindin, a summer associate at Outten & Golden LLP along with Michael Weil at Orrick, Herrington & Sutcliffe LLP. Thefull text may be found in RESTRICTIVE COVENANTS AND TRADE SECRETS IN EMPLOYMENT LAW: AN INTERNATIONALSURVEY, VOLUMES I AND II, ©2010 American Bar Association. Reprinted with permission. More information and ordering information isavailable at www.bnabooks.com. This publication is protected by copyright. © 2010 Outten & Golden LLP Due to the general nature of this content, this publication is not intended to be and should not be regarded as legal advice.

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