How Restrictive Are Restrictive Covenants? Fort Wayne IN

Commercial printing businesses have an opportunity to protect themselves if an employee or an independent contractor were to leave their service for another job opportunity.

Restrictive covenants limit the geographic area and time where a former worker may compete against the printing business.

The restrictive covenant is negotiated prior to or during the employment retention, and is, generally, contained in a written agreement.

Restrictive covenants protect the printing business from the person leaving, so they will not use the resources, knowledge, and property of the shop for someone else's benefit.

Where You Live Matters

Various state laws apply to these restrictive covenants. For example, the law in New York State is quite different from the law in place in New Jersey.

The law in New York provides that courts will review restrictive covenants, and, generally, will not make any changes if they determine that they are enforceable.

In New Jersey law, however, the state permits its courts to make changes in restrictive covenants so they become enforceable. Such a practice is sometimes called using a "blue pencil."

Nonetheless, New Jersey and New York courts will consider many factors before they determine if the restrictive covenant is enforceable. These factors can include such things as the time limit, scope, and geographic limitation of the restrictive covenant.

The courts will determine if these limits are reasonable to protect the interests of the business without overly burdening the worker.

That is, the courts may alter restrictive covenants, and not permit a person to work within a certain geographic distance from the current business, or for a set time.

Of course, every situation is different, and courts will balance restrictive covenants against the particular hardship on the worker.

It Matters How the Person Leaves

When courts review restrictive covenants, the reasons and circumstances surrounding the departure are important.

If someone in your employ is terminated with or without cause, the restrictive covenant originally agreed upon may or may not be maintained if the termination was inappropriate.

Again, the general rule is that these decisions are made on a case-by-case basis, and some courts—especially in New York—may or may not permit the enforcement of a restrictive covenant at all.

Every printer must be aware of the different laws of their state when determining if these restrictive covenants will be applied.

Printers should carefully draft restrictive covenants to protect their interests if an employee or independent contractor leaves, and be prepared to litigate these restrictive covenants if the person decides to work for another printing business.

Ernest E. Badway is a partner with the New York and Newark, N.J., law firm of Saiber Schlesinger Satz & Goldstein LLC, practicing business law where he advises and counsels numerous printing clients on corporate, business, litigation, employment, and many other matters. Mr. Badway may be reached at eeb@saiber.com or (973) 622-3333.