Boston Beer Co., the brewer of Sam Adams and other craft beverages, is taking heat for its overuse of noncompete agreements. In a recent article, the Boston Globe cites examples of several former lower-level Boston Beer employees forced out of the industry they love because of the noncompete agreements their former employer forced them to sign at their time of hire.
Legally speaking, to be enforceable, a post-employment restrictive covenant must be narrowly tailored by time, geography and a reasonable business interest worthy of protection.
Yet, like the Boston Beer example, all too often employers require too many employees to sign overly broad and overly restrictive agreements. It’s bullying and a scare tactic. It’s also legally unsupportable. And it’s also why the FTC, and many states are looking at regulatory and legislative solutions to limit use of noncompete. The justice system is also involved in reshaping noncompete agreements.
Employers should not wait for the FTC or states to tell them what to do here. Instead, employers should use commonsense discretion with a tiered approach to the use of post-employment restrictive covenants:
Tier 1: Are you worried about protecting confidential information or intellectual property? In that case, maybe a non-disclosure agreement is all you need.
Then a non-solicit is in order (plus the non-disclosure).
Tier 3: Is what an employee provides so unique in nature that you genuinely will be irreparably harmed by the employee jumping to a competitor? Then, and only then, is a broad noncompetition agreement called Tier 2: Are you worried about an employee poaching your customers, employees or vendors? for (plus the non-disclosure and non-solicit).
In other words, narrowly tailor your restrictive-covenant agreements to the specific interests you are trying to protect. And, if you don’t have such an interest, forego the agreement altogether for that employee or group of employees.
Noncompetes are being scrutinized more closely than ever before. Employers are encouraged to review their current noncompete agreements and ensure they are fit for purpose and narrowly tailored to protect their legitimate business interests. An attorney can assist you in crafting restrictive-covenant agreements tailored to your company’s specific needs to protect your confidential information, or intellectual property, and customer poaching.