Prevent unfair competition with restrictive covenants

by | Apr 27, 2016 | Business Litigation |

It is important for any business in Ohio to protect its trade secrets and other confidential information from falling into the hands of competitors, or being used by former employees. The Ohio State Bar Association recommends companies use restrictive covenants to help safeguard their vital secrets.

Restrictive covenants include confidentiality, non-solicitation and noncompetition agreements. These covenants must be carefully written to avoid a court determining their terms to be unreasonable. The following briefly explains the purpose of each type of restrictive covenant:

  •          Confidentiality agreements are used to prevent a third party from receiving confidential information such as pricing data or intellectual property. They are also known as non-disclosure agreements.
  •          Non-solicitation agreements are intended to prevent vendors and customers from being engaged in business by a former employee, or solicited for the same.
  •          Noncompetition agreements preclude business challenges from a former employee within a defined geographic area, and for a particular amount of time.

Each covenant type offers a different kind of protection in the event of a breach of contract.

Vigilance must be maintained by companies when it comes to preventing employees from becoming competitive threats after separation. Business News Daily discussed a recent Symantec study on the topic. The following details were among Symantec’s findings:

  •          Nearly 70 percent of employees report their companies do not attempt to prevent the use of another business’ confidential data.
  •          About 40 percent of exiting employees who took confidential data indicated plans to provide new employers with that information.
  •          More than half of workers think it is legal to use trade secrets taken from a competing company.
  •          During a 12-month span, 50 percent of separated employees left their jobs with some of their former employers’ confidential information.

These figures should make it plain that every organization in Ohio would be wise to adopt restrictive covenants for their own protection.

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