Pub. 6 2011-2012 Issue 2

www.nebankers.org 12 Extraordinary Service for Extraordinary Members. B ANKING IS A RELATIONSHIP business, and your cus- tomer relationships are entrusted to your key em- ployees. How do you protect your- self? Noncompete agreements have limited power under Nebraska law, but there is more to it than that. Whichever side you are on, there are limits to what you can and cannot do legally, but you can still protect yourself and your business if you are well prepared. This article will summarize key legal issues affect- ing the competitive loss or gain of an employee, and identify some best practices to protect your position on both sides of the fence. Key Legal Issues Most of the legal issues involved in this scenario are determined by state law, and the law varies widely from state to state. As a general rule, At 4:30 Friday afternoon one of your top people resigns and says he is joining a competitor and taking many of “his” customers with him. At 9:00 Monday morning the former employee and your competitor receive “cease and desist” letters from your law firm. You and your competitor both feel wronged and are angry. Your lawyers are having fun and you’re not. Securing Employee Loyalty Legal Limits and Best Practices Jonathan R. Breuning , Husch Blackwell LLP COUNSELOR’S CORNER Nebraska public policy favors fair and free competition in themarketplace for both customers and employees. Here is a summary of the key Nebraska legal principles defining “fair” and “free” competition in this setting: 1. Noncompete and Nonsolici- tation Agreements. Nebraska law permits the enforcement of employment-based restrictive cov- enants only when the covenant is reasonable in the sense that it is (1) not injurious to the public, (2) not greater than necessary to protect the employer’s legitimate interests, and (3) not unduly harsh and oppres- sive on the employee. Unlike many other states, the Nebraska courts have consistently applied this test quite narrowly to mean that such a covenant may be valid only if it restricts the former employee from working for or soliciting the former employer’s clients with whom that employee actually did business and had personal contact . In this sense, employment-based covenants in Nebraska are essentially limited to covenants not to solicit, rather than covenants not to compete; no covenant under Nebraska law can entirely stop an employee from go- ing to work for a direct competitor. Also, if the covenant purports to go any further it is entirely unenforce- able—the Nebraska courts will not revise or partially enforce the covenant; poorly written or overly broad noncompete agreements are completely unenforceable. 2. Trade Secrets andConfidential Information. A deep discussion of trade secrets is beyond the scope of this article, but two key thoughts should be kept in mind. First, Ne- braska has a Trade Secrets Act that prohibits the improper use or dis- closure of a trade secret as defined by statute. 1 Protection is limited to information meeting the statutory definition and, even then, only if there is a strong internal program to maintain its secrecy. This brings us to the second thought, which is that an employer can, through a