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Restrictive covenants: a comparative jurisdiction perspective - Essay Example

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Restrictive covenants: a comparative jurisdiction perspective

The object of this essay is to examine the current legal viewpoints on the legality and enforceability of the different kinds of restrictive covenants in labor law, and see the differences the jurisdictions of Texas and Maryland have held on the matter vis--vis that of Massachusetts. Post employment restraints have been around for centuries, but have been popularized in the legal profession due to a number of suits that are based on whether or not a certain restrictive covenant is legal, reasonable, or enforceable to the case at bar. Misappropriation of trade secrets, breach of a duty of loyalty, industrial espionage, breach of nondisclosure agreements and breach of covenants not to compete are some of the more common restrictive covenants employers have used in attempting to protect their business interests with regard to former employees.Thus far, most case law has upheld the doctrine that restrictive covenants have to be viewed and adjudged as regards the various intrinsic circumstances surrounding the business. These factors include the nature of the employer's business and the character of the employment involved, the situation of the parties, the necessity of the restriction for the protection of the employer's business and the right of the employee to work and earn a livelihood.
A topic that has been seen as particularly problematic is that of restrictive covenants as applied to at-will employees. This is generally so because of the fact that at-will employees may be fired for any reason whatsoever, whether good or bad, or even anent one. Courts have been particularly careful in rulings relating to this topic, in order to prevent the evil created by the unfair dismissal of an at-will employee who is further restricted from finding other employment due to a restrictive covenant.
The jurisdiction of Texas has had long history in trying to resolve cases involving these issues. Since the late 1980's the Texas Supreme Court has been steadfast in not enforcing restrictive covenants. This prompted the Texas legislative body to create legislation that expands the situations in which covenants could be properly enforced, therefore attempting to reverse the Texas Supreme Court's policy of upholding worker's free movement above business investments. Upon its approval, the Texas Supreme Court did not apply the law to at-will employees, prompting amendments to the law to include at-will employees with the limitations abovementioned as to the reasonableness of time, geographic location, etc.
Light vs. Centel Cellular Co. saw the first implementation of that law, in effect upholding a restrictive covenant not to compete against an at-will employee who left the company after it was bought out. The Court held so on the basis that the at-will employment agreement contained several terms, thus the covenant was ancillary to an enforceable agreement. But as regard the covenant not to compete, the court held that it was not ancillary to the agreement's enforceable aspects, thus unenforceable in itself.
This case is slightly similar in timeliness and circumstances to the Massachusetts case of Ikon Office Solutions, Inc. vs. Belanger. Both cases were decided in the 1990's and both involve an employee who was working for a company that was bought out. Both cases upheld the doctrine that should a portion of a restrictive covenant be found unenforceable, the enforceable portions would be upheld, and only the unenforceable portions struck down.
The intrinsic issue of customer contacts has been the most commonly litigated post-employment issue. In the form of restrictive covenants, employers use them to protect customer information from being used for the benefit of a competitor through the hands of a former employee who had been in contact with those customers. The manner in which cases of this nature are decided also relate to the circumstances within the case itself, such as the question on whether ...Show more
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The object of this essay is to examine the current legal viewpoints on the legality and enforceability of the different kinds of restrictive covenants in labor law, and see the differences the jurisdictions of Texas and Maryland have held on the matter vis-vis that of Massachusetts…
Restrictive covenants: a comparative jurisdiction perspective
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