Racal-Redac Inc., a $25-million CAD/CAM comapany in Westford, Mass., used to require all of its employees to sign an agreement promising not to work for a competitor for one year after leaving the company. Last spring, when two new engineers refused to sign the noncompetition agreement, Michael Marsh, vice-president of marketing and development, not only permitted them to stay, but changed company policy -- noncompetes are no longer required.
As more employees refuse to sign them, and as courts become increasingly unwilling to enforce them, covenants not to compete are rapidly giving way to another type of arrangement between employer and employee -- trade-secret agreements. While a noncompetition agreement prohibits an employee from going to work for a competitor during the term of the contract, a trade-secret or proprietary-information agreement prevents an employee from ever using his or her former boss's secret information.
Although the law protects an employer against a theft of proprietary information even when there is no explicit agreement, companies still find such agreemens a useful reminder to employees of their legal obligations, says Boston attorney David Rosenthal. And when the use of trade-secret information by former employees is suspected, companies have been aggressively pursuing court action. "Employers in all industries are more and more inclined to enforce trade-secret agreements," says Rosenthal. "But litigation is most common in high-tech fields, where whole companies can be based on one piece of technology. If a competitor is eager to lure your away by paying more money, its's because he is expecting you to bring something valuable along."