Pub. 12 2021 Issue 1

Pub. 12 2021 I Issue 1 Spring 13 West Virginia Banker more effective for officer and executive-level positions but less applicable to roles that do not require highly specialized knowledge or skills. The key test for whether a noncompetition agreement is en- forceable is reasonableness. In particular, courts will consider the employee’s role, the reasonableness of time, geography, and scope limitations and whether the employer can show a legitimate business interest in enforcing the agreement. The next type of agreement that employers may use is a nonsolicitation agreement. Whereas a noncompetition agreement restricts the employee from engaging in business similar to that of the employer within a designated time and territory after the employment ceases, a nonsolicitation agreement restricts the employee from soliciting the employ- er’s customers or making use of the employer’s confidential information. These agreements are generally intended to protect client lists and customer relationships. Because non- solicitation agreements ordinarily do not include territorial limits, West Virginia courts view these agreements as less restrictive on the employee and less restrictive on the eco- nomic marketplace. Accordingly, these agreements tend to be a little easier to enforce. For a nonsolicitation agreement, the agreement to be enforced must protect a legitimate business interest, be reasonable, and not unjustly restrict the employee from engaging in business activity that the employ- ee seeks to pursue. The final type of agreement that employers commonly use to protect their business interests are nondisclosure agreements. These agreements are intended to protect a business’s confidential information, such as trade secrets, methods of operation, names of customers, price lists, finan- cial information and projections, personnel data and similar information. Notably, to be enforceable, these agreements must prohibit the sharing of only nonpublic information. Information that is publicly available or can be independently developed will not usually meet the threshold. While noncompetition agreements should typically be re- served for specialized employees, nondisclosure agreements Pamela J. Ferrell is a partner with the regional law firm Bowles Rice. Practicing from the firm’s Parkersburg office, she focuses on labor and employment law, litigation and regulatory matters. Contact Mrs. Ferrell at (304) 420-5590 or pferrell@bowlesrice.com . should be strongly considered for all levels of employees. As long as an employer can prove that an employee or former employee received confidential information, and as long as the employer makes an effort to keep the information confidential, these agreements are generally enforceable. Where an employer itself publicly releases once-confidential information, it would not be entitled to enforce an employee to keep the same information confidential. Because nondisclosure agreements are easier to enforce, an employer seeking to use a noncompetition or nonsolicitation agreement should always also use a nondisclosure agree- ment for the subject employee. That way, even if certain provisions of the agreements cannot be enforced, it is likely that the employer would still be able to protect its confiden- tial information. Furthermore, nondisclosure agreements may be used in conjunction with services offered by a contractor, vendor, or other third parties when confidential or sensitive information is being shared within the contractual relation- ship’s scope. In deciding which of these agreements to use with an em- ployee, a financial institution should consider several factors. The financial institution should consider the employee’s role; specifically, the employee’s access to customers and confidential information. A financial institution should also consider the competitive footprint of its region. For some employees, a nondisclosure agreement may be sufficient. However, for other employees, a financial institution may consider utilizing all three forms of restrictive covenants to protect its personnel investments, customer relationships and confidential information.  The key test for whether a noncompetition agreement is enforceable is reasonableness. In particular, courts will consider the employee’s role, the reasonableness of time, geography, and scope limitations and whether the employer can show a legitimate business interest in enforcing the agreement.