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Retaining Key Personnel Through Effective Agreements

by Becker LLC

In today’s market, employers are keenly aware how difficult it can be to retain top personnel, whether it be a top salesperson, recruiter, or c-suite employee. To retain these individuals, employers have begun thinking outside the proverbial box by offering special benefits (e.g. phantom stocks, top hat plans, etc.). However, the first line of defense for employers in keeping its personnel and protecting its business has always been and will likely continue to be an employment agreement and restrictions placed therein. The restrictions usually consist of non-competition provisions, non-solicitation provisions, and non-disclosure provisions (“restrictive covenants”).

While some states will not honor restrictive covenants because they are against public policy, many states do. Thus, knowing which state you are operating in and which law applies under the operative agreement is imperative.

Secondly, with regard to restrictive covenants, many states allow for the “tolling” of the restrictions while an employee is in breach of the restriction(s). Tolling provisions typically provide the restriction(s) will be extended by the period of time during which the employee was in breach of the agreement. For example, if Employer A has a valid non-competition agreement, with a tolling provision, with Employee B for two (2) years after Employee B’s termination of employment with Employer A, so long as no breach occurs during those two (2) years, then the non-competition agreement expires at the end of the period. However, if Employee A began breaching the agreement after six (6) months, the length of the breach would be tacked on to the original period.

To accomplish the above, these agreements must explicitly provide for tolling provisions, otherwise a court is not likely to provide the same --- courts do not typically write a better contract than what was written and agreed to by the parties. Therefore, it is imperative employers discuss the use of tolling provisions with their counsel to ensure they have the maximum protection possible in such instances.

DISCLAIMER: THE ABOVE IS NOT INTENDED AS LEGAL ADVICE. ANY QUESTION REGARDING THE ABOVE OR ANY OTHER LEGAL ISSUE SHOULD BE DIRECTED TO YOUR ATTORNEY.

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