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NY AG settles case against TX company concerning non-compete agreements

For business, protecting confidential information is important to maintain competitiveness in the marketplace. Businesses can take a number of steps to protect confidential information, including making use of intellectual property protections and identifying trade secrets and establishing policies to secure them. 

Confidential business information can also be protected by managing the employees entrusted with that confidential information. Non-compete agreements are a commonly used tool for this, but businesses do not have an unlimited ability to restrict employees from competing with the business. There are certain limitations, such as requiring all employees without discrimination to sign such agreements. 

Recently, Attorney General Eric T. Schneiderman’s office announced that an agreement had been reached with a Texas-based medical information services provider concerning the use of non-compete agreement for most of the company’s employees in New York. Under those agreements, employees of the company were prohibited from working for competitors, whether or not the employee actually had access to confidential information.

Schneiderman’s office stepped in and pursued legal action against the company on the grounds that prohibiting rank-and-file workers from looking for work after leaving a company is against public policy. The agreement does allow the company to continue requiring top executives to sign non-compete agreements that prevent them from working for competitors after leaving the company, but no longer may it impose such agreements on ordinary workers who do not have access to sensitive information.

In a future post, we’ll look at some of the requirements of New York law concerning non-compete agreements and how employees can benefit from working with an experienced attorney when disputes arise concerning these agreements. 

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