Why US Employers Should Review Noncompetes in Equity Award Agreements

We are pleased to share a recent LegalDive article, “Why companies should review noncompetes in equity award agreements,” with quotes from Barbara Klementz.

Given increased government scrutiny, employers need to be mindful of the time periods noncompetes cover and review state-specific requirements.

In the light of the sharp focus the federal government and a growing number of states have placed on noncompetes, many employers have reexamined their use of that type of contractual clause in employment agreements.

Barbara,  chair of Baker McKenzie’s North American Compensation Practice, is advising businesses to also scrutinize the noncompetes that they include in employees’ equity award agreements. Her recommendation comes amid a pending Federal Trade Commission proposal to ban noncompetes, though Barbara said it would be premature for companies to stop using the contractual clauses altogether.

Tailor agreements

Noncompetes in equity award agreements are often seen in the finance and pharmaceutical industries, among others, and they can be another tool for ensuring employee compliance with such clauses.

Barbara’s top piece of advice for companies is to make sure they don’t take an “overbroad” approach to imposing noncompetes on employees in the equity award context.

Click here to view the article.

This article was originally published in Legal Dive.