Vail Daily column: Confidentiality and non-compete agreements
The aspen are turning. The maple and choke cherry are aflame. The nights are dipping into the low 40s and even 30s. You may think, it’s a forest out there. The White River National Forest to be precise. And while you’d be right, you’d also be mistaken.
In point of fact, it’s a jungle out there.
A quick look at Dictionary.com will confirm it, listing as the seventh definition of the word “jungle” “a place or situation of ruthless competition.” So while it may, in fact, be a quaking forest out there, ablaze in the glory of fall, in the world of business it always has been — and is — a jungle.
That established, let’s hoist our britches and move on.
Because it’s a jungle out there, one has to fight and claw and scratch to survive. One must protect one’s copse and veld. And to do so effectively, one must have the proper tools. One must have mace and spear and, in the modern world anyway, an agile and fluid pen. And maybe a good lawyer, too.
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And this is where confidentiality agreements and non-compete agreements come in.
What they are is this:
A confidentiality agreement recognizes that XYZ Corporation or even Mom and Pop’s Pop Stand have worked hard to get where they are. And in working hard to find their place in the economic sun, they have developed certain recipes for success. These may include their means and methods of producing services or products, their client lists, supplier lists, and various techniques and knowhow. These are precious to them and, if they were absconded with, would cause them grievous harm. And so to protect this “secret sauce,” if you work for or with XYZ Corp or Mom or Pop, they may ask you to enter into a confidentiality agreement with them whereby you vow — on the pain of serious legal consequences falling on your head should you not keep your end of the bargain — to preserve, protect and hold in strict confidence those special things that confer upon XYZ or Mom and Pop their competitive advantage.
A confidentiality agreement may be “for term,” that is for a stated number of years, or in perpetuity — so long as XYZ is in business. The usual exceptions to your buttoned lip are things that are in the public domain, things that come into your hands by licit means that have not flowed to you by virtue of your association with XYZ or Mom and Pop, or in compliance of a court order. Otherwise, what happens in XYZ stays in XYZ.
A non-compete agreement contemplates that you present a potential danger. Let’s say that you possess a special skill. Say, for example, you are an orthopedic surgeon of some renown. You agree to come to work for Eagle Valley Bone Drillers to lend your special skills. Bone Drillers recognizes that, owing to your special skills, you will develop a clientele and, as Drillers is spotting you your overhead, they are invested in the clientele you will soon develop. If one day you leave, you will present a threat to Drillers and will (forgive me) bleed off some of its good will and income. To staunch the loss, Bone Drillers may require you to enter into a non-compete agreement whereby you agree, as a condition of your employment, to one day strike out, if you must, at an agreed-upon remove from Bone Drillers — say beyond the clement confines of Happy Valley. And if you open your own shop, you must do so where the threat to Driller will be diluted.
Generally, there are two components to a non-compete. It should be said, too, that non-competes are applicable generally only to executive and “skilled” positions rather than to general labor. For example, if you spend a pleasant winter as a “liftie” at a Vail Resorts property and you one day hie off to Intrawest, the Resort Company cannot enjoin you from earning your living at a nearby competitor resort.
Neither can a non-complete be overly broad and exclude you from making a living in your chosen profession. Let’s say you are possessed of a wicked curveball. You sign with the Yankees but know, one day, your curve may command a higher market value say in Tampa. The Yanks cannot compel you to sign a non-compete that is so broad as to say, you may not peddle your curveball wares to other MLB franchises as so doing would preclude your ability to work.
Back now to the two major components of a non-compete agreement which relate to time and distance, both of which must be reasonable under the circumstances. If, say, our orthopedic surgeon enters into a non-compete with Drillers, then the agreement will likely provide that they may not practice orthopedic surgery for say a period of two years following her separation from Bone Drillers within the geographic confines of Eagle County. That is likely reasonable and would be upheld by the courts. If, however, the agreement said they could not open shop anywhere in the United States or that they were excluded from practicing in Eagle County until global climate change turns us into a seaside resort, then the courts would take a dim view of such overbroad restrictions.
To survive in the jungle, one must be sharp of tooth and claw. And one way of so doing is with the proper legal instruments. Non-compete and confidentiality agreements preserve and protect the hard work of a business finding its way into the light. And, so long as properly crafted, the courts will support the right to protect what is, in fact, one’s property including the goodwill which has been garnered by the sweat of one’s brow.
Rohn K. Robbins is an attorney licensed before the bars of Colorado and California who practices in the Vail Valley with the law firm of Stevens, Littman, Biddision, Tharp and Weinberg LLC. His practice areas include business and commercial transactions, real estate and development, family law, custody, divorce and civil litigation. Robbins may be reached at 970-926-4461 or at either of his email addresses, email@example.com or firstname.lastname@example.org.