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Instructive battle brewing between tech rivals re NDA agreements

Seasoned business principals in New York companies and across the country know that paying careful attention to noncompete agreements inked with key employees can be vitally important down the road.

That road is the one taken by select workers when they give notice and take their talents to a new employer.

That entity is often a business rival. When a departed employee hooks up with a competitor, concerns can arise regarding the former's proprietary information. A well-tailored noncompete agreement prepared by an experienced commercial law attorney can be an invaluable document that helps ensure the continued confidentiality of trade secrets and other closely held data.

As noted in a recent Forbes article focused upon nondisclosure agreements, flat-out complexity and uncertainty regarding such contracts can arise when a worker leaves one employer for another.

In the matter spotlighted by Forbes, several workers left one tech firm for a smaller start-up. All those workers had signed NDA agreements with the first company, which quickly cited their violation after the employees began their new jobs.

A quick insertion: The former employer is headquartered in Florida, the latter in California. Both firms have offices in North Carolina, where all the affected employees live and work.

The first employer's cease-and-desist letters were quickly met by a lawsuit filed by the new employer in a California court, alleging unenforceability on various grounds, including unlawful interference with the pursuit of new employment.  (Notably, California arguably has the most worker-friendly laws in the country regarding NDAs. In short, such agreements are in most respects heavily disfavored by state courts.)

In response, the first employer countered with its own suit, filed in Florida. That complaint establishes that the executed employee agreements are all governed by North Carolina law, which is less restrictive than California's statutory dictates.

Which side will prevail? Which law will govern?  It's not yet clear, as the dispute is ongoing.

What emerges with clarity is the instructive point that business managers concerned with proprietary company information should pay close attention to every aspect of a noncompete agreement.

That includes its governing law and even locale-related particulars relevant to business headquarters and where employees live. Notably, the second employer in the above-cited case is arguing that California law must apply even for its employees who reside outside the state.

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