Pub. 12 2021 Issue 1

www.wvbankers.org 12 West Virginia Banker Protecting Your Most Valuable Assets: How Employee Noncompetition, Nonsolicitation, and Nondisclosure Agreements Can Be Applied in the Banking Industry By Pamela J. Ferrell, Bowles Rice A bank’s employees, clients, and trade secrets are among the most crucial assets that help keep it profitable. Financial institutions must know the best ways to protect those assets. Some of the most popular tools for protecting these important resources are employee noncompetition, nonsolicita- tion, and nondisclosure agreements. De- pending on each employee’s role within the company, a financial institution may benefit from having some or all of these agreements in place. But how do these agreements differ from one another, and how likely are they to be enforced? Noncompetition agreements are intend- ed to protect an employer’s investment in training and to develop an employ- ee. Of the three types of agreements discussed herein, noncompetition agreements tend to be the most difficult to enforce. In West Virginia, an “anticom- petitive covenant” will only be upheld if it is “supported by consideration, ancillary to a lawful contract, and both reasonable and consistent with the public interest.” Although some states consider contin- ued employment sufficient to enforce a noncompetition agreement, West Virgin- ia requires additional consideration, such as some alteration in salary, benefits, or conditions or terms of employment. Notably, however, new employment will typically meet West Virginia’s test for adequate consideration. In West Virginia, an employee covenant not to compete must be reasonable in time and area limitations. It must be to protect an employer’s business — not to intimidate employees from leaving. Typically, these types of agreements are