Skip to main content

With Non-Compete Provisions, Let’s Remember the Requirement of a “Protectable Interest”



The strongest approach for an employer hiring someone supposedly bound by a non-competition provision may be to present an argument that the information in question is not information that qualifies as a “protectable interest” to begin with.

Proving that information is “protectable” can be difficult. Customer lists and price lists are especially tricky. If they are developed through substantial effort and kept in confidence, and the information is not otherwise readily obtainable, they typically qualify as protectable. But if the list contains information that is not much more than publicly available information (for example, picking up your phone, going online, finding a directory of persons in the industry), they typically don’t. Often, a would-be employer can develop prices by locating purchases by a public agency that state laws require to be disclosed. That same employer may also have other resources that identify customers, as discussed above. A savvy employer likely already uses these types of resources to gain an advantage in competing for customers even without the need to hire a new employee.

Art and Cook, Inc. v. Haber, 2017 WL 4443549 (ED NY Oct. 3, 2017), shows the intricacies of whether something qualifies as protectable. Even though the defendant/former employee had e‑mailed lots of business documents to his personal e-mail account, including customer lists and marketing business plans, and called on a potential customer for information about a product line, the court analyzed the data to reach the conclusion that “the contacts on Plaintiff’s [(the former employer)] customer list are generally known in [Plaintiff’s] industry” and this was “fatal” to the ability to prevail on the merits.

Another useful decision describing a “protectable interest” is M.C. Dean, Inc. v. City of Miami Beach, Florida, 199 F Supp 3d 1349 (SD Fl 2016), which explores how providing payroll information to a government agency, without invoking an obligation to keep it secret, destroys the ability for it to qualify as protectable. In that case, there was no effort to take reasonable steps to protect the alleged secrecy.

In short, although many state legislatures (more than a dozen) have passed, or are likely to pass, laws that make it harder to enforce non-competition agreements (ranging from restrictions on choice of forum and choice of law, to setting salary thresholds, to eliminating non-competition agreements for certain occupations, to eliminating “red pencil” restrictions (in other words, allowing a court to set aside a non-competition agreement if some parts of the agreement are not enforceable), to limiting the duration of non-competition agreements, to requiring notice of a non-competition agreement before the worker begins his or her employment, your best bet may be to focus on whether the information really is protected.

  Edit this post