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Preventing Existing Employees From Taking Your Business With Them

On Behalf of | Sep 13, 2017 | Employment Law

One way for a business to protect its competitive edge is to take steps to prevent former employees from using confidential and proprietary information and good will in competition against the company through a non-disclosure, non-solicitation and non-compete agreements with their employees.  New Hampshire courts will generally enforce an agreement’s: (i) nondisclosure provision that prevents employees and former employees from disclosing or using company confidential and proprietary information; and (ii) a non-solicitation provision that for a reasonable time, usually not past one year after leaving that company, prohibits taking customers away from the company that the employee first contacted while employed by that company. However, a non-competition provision that prohibits a former employee from working in competition with her former employer will be narrowly construed to only protect the legitimate business interests of the employer; two of which would be protecting confidential and proprietary information and the good will of the company.  For example, a non-competition provision stating that a salesperson cannot sell to any customers of the former employer even if she had no contact with the customer while working for her former employer is unlikely to be enforced since she is not leveraging the good will she obtained while working for that customer to get the customer to come over to her new company. Unless she is using confidential information of her prior employer to attract that customer she had no contact with while working for the company, the court would likely deny a request from the prior employer to order her prevent her from working with such customers.

There is a specific New Hampshire statute, RSA 275:70 that requires that any employer who requires an employee, who was not previously employed by that company, to execute a non-competition agreement as a condition of employment, to provide a copy of that non-competition agreement prior to the employee’s acceptance of the offer of employment.  If the non-competition agreement is not enclosed with an offer letter that the employee candidate signs even though the requirement of signing a non-competition agreement is mentioned in the offer letter, that non-competition agreement she later signs on the first day of her job will be void and unenforceable.  The statute further states that while that non-competition provision of the agreement would be void, all other provisions of employment, including confidentiality and intellectual property assignments will remain in full force and effect.

If the employer plans on selling her business and as a way to enhance the potential good will value of the business plans to increase the likelihood that the sales force stays with the buyer company by requiring an agreement with a non-competition provision to be signed by her existing sales force, the non-competition provision of the agreement would not be void because of the statute yet would still be narrowly construed to protect only the legitimate interests of the employer. As a result, the sales force if they left would probably be prohibited from accepting customers they worked with before at their prior employer and from using confidential information yet would not be prohibited from working in competition against their prior employer.

J. Daniel Marr is a Director and Shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and individuals on a variety of legal issues and advocating on their behalf. Attorney Marr is licensed and practices in both New Hampshire and Massachusetts. Attorney Marr can be reached at [email protected].