It’s important to carefully tailor noncompete agreements, also known as covenants not to compete. Employers can prohibit employees from poaching customers, but it’s essential to have an attorney help you craft a covenant that will prevail in court.
Employment agreements are contracts. When disputes arise, they’re typically litigated in state courts because they involve state contract laws. But under the right circumstances, the Employee Retirement Income Security Act (ERISA) may apply to the agreement, effectively making the contract a protected benefit plan.
If you use employment contracts for key employees, and those contracts include a “for cause” discharge clause—essentially allowing you to terminate the contract (and employment) for specified reasons—include a paragraph that includes acts or omissions that occurred before the contract was signed.
If you use mandatory arbitration agreements, take the extra time to make sure courts will enforce them. In New York, that means showing that the applicant or employee knew that getting and keeping her job required agreeing to arbitration of all employment disputes.
Q. My company, a North Carolina corporation, has only four employees, all of whom are equal shareholders. We don’t have employment contracts. May three of us decide to terminate the employment of the other, a 25% shareholder?
Sometimes, it pays to take the time and spend the money to have legal experts carefully review your proposed actions. That’s especially true if your company is changing the way it does business in a fundamental way and wants employees to sign off on changes that dramatically affect how they are paid or whether they remain employees.
If you’re an out-of-state company that makes New Jersey employees sign employment contracts requiring disputes to be brought in your home state, don’t expect that to stick.