Keep Up with Current Employment Law Issues

The Basics: What is a Restrictive Covenant?

As is well known, many employers include provisions in employment and severance agreements which are designed to limit former employees’ actions after the employment relationship has ceased. A restrictive covenant is a contractual provision restricting the activities of a former employee or agent or the former owner of a company for a fixed period after the cessation of the employment relationship or after the sale of the company in order to protect the employer’s legitimate business interests.

In my September 15 article, I identified certain steps that companies seeking and defending against preliminary injunction motions under the Defend Trade Secrets Acts of 2016 (“DTSA”) should consider. We left the discussion of whether the inevitable disclosure doctrine could be relied upon when seeking a preliminary injunction for a later day. Today is that day.

The Defend Trade Secrets Act of 2016 (the “DTSA”) is a federal statutory vehicle that companies can use to try to protect their most valuable assets (along with their employees, hopefully) — their trade secrets. Since the DTSA is only slightly more than a year old, there have been relatively few federal court decisions addressing the scope and breadth of the statute. One such case decided this summer in the Northern District of Illinois, Cortz, Inc. v. Doheny Enterprises, Inc., 2017 WL 2958071 (N.D. Ill. 2017), sheds light on the type of information afforded protection under the DTSA. The decision also offers insight as to how a plaintiff can improve its chances of securing a preliminary injunction at a misappropriation hearing under the DTSA as well as under state law and how a company defendant can attempt to defeat that motion.