Vermont employers have long relied on non-competition agreements to protect trade secrets, confidential information and customer relationships, but the law governing when — and whether — those agreements are enforceable is evolving. At a recent DRM HR Café session, attorneys David Harlow and Zak Heier explained what still works, what doesn’t, and where the law is headed.
What Makes a Non-Compete Enforceable
Vermont courts will only enforce a non-compete if it protects a legitimate business interest — such as trade secrets, confidential information, or customer goodwill the company has invested in building. Ordinary competition is not a protectable interest, and a non-competition agreement that is not narrowly tailored to a specific competitive interest, geography, and duration may not be enforceable. The more specific the restriction is to the business interest at stake, the more likely a court is to enforce it.
Courts are increasingly reluctant to enforce non-competition agreements. Some states have adopted statutes restricting or prohibiting the use of non-competition agreements. It is important to assess whether an employer’s non-competition agreements are enforceable and up-to-date.
Choosing the Right Candidates
Not every employee needs a non-compete. The best candidates are employees with access to trade secrets or confidential information, and employees who cultivate customer relationships or goodwill on the company’s behalf — not simply anyone who is issued an employee handbook. A blanket policy requiring every new hire to sign a non-compete can backfire: it may make it more difficult to enforce non-competition agreements as to the select employees who may legitimately warrant them.
Alternatives Worth Considering
Non-competes not the only tool available. Non-disclosure agreements can protect confidential information indefinitely, without restricting where an employee can work. Non-solicitation agreements — which prohibit a departing employee from poaching customers or coworkers — may be an appropriate option in some circumstances. An agreement for “garden leave,” where an employer keeps a departing employee on payroll but off the job for a defined period, may be another option.
The Bottom Line
Audit your non-compete practices regularly for continued compliance. Carefully select those employees who should receive non-competition agreements. Make sure that any non-competition agreement you enter with an employee is updated, reasonable and narrowly tailored to protect your company’s interests. If an employee subject to an enforceable non-compete does leave for a competitor, act immediately — enforcement typically requires a preliminary injunction, and delay can undermine your case.
For questions about non-competition, non-disclosure, or non-solicitation agreements, please feel free to reach out to David Harlow or Zak Heier, or visit DRM’s Labor & Employment practice page.
The Labor and Employment Lawyers at Downs Rachlin Martin host a monthly HR Café on the first Wednesday of the month at 8:30am. The program will take a break in August and return September 2 with a session on HR’s role in crisis communications, presented by Heather Southwell. If you want to receive invitations for future DRM HR Cafés and are not currently on the list, please click here.
This article is for informational purposes only and does not constitute legal advice. Legal advice requires a new engagement with Downs Rachlin Martin PLLC.
