Businesses with multiple employees often need to have very thorough employment contracts to protect themselves from liability. A company could end up legally and financially responsible for the misconduct of its employees, as is the case with sexual harassment lawsuits.
Companies can also suffer financial losses when a former employee either goes to work for a direct competitor or starts a competing business in the same industry. To protect against a former worker damaging your market share or violating your intellectual property rights, your organization may have integrated non-compete agreements into its employment contracts.
Will you be able to enforce those agreements if you discover that a worker has violated them?
Hawaii has limited non-compete enforcement in recent months
Although Hawaii has not taken the drastic stuff that California did by outright banning non-compete agreements, court rulings have limited enforcement rights for such an agreement. The state Supreme Court recently found that, barring an immediate need to protect the company, post-employment non-compete agreements were likely not enforceable.
There is also the looming threat of a federal ban on non-compete agreements in employment contracts. The Federal Trade Commission (FTC) recently announced that it wants to end the use of non-compete agreements, as they stifle fair competition and opportunity for employees, as well as aspiring entrepreneurs.
Although a ban is not yet in place, employers worried about protecting their market share may need to start planning for the possibility of significant legal changes. In the meantime, those who suspect a violation of a non-compete agreement will need to go to court to enforce their contracts.
Occasionally reviewing contracts benefits every business
There are ways for you to modernize your organization’s employment contracts that will reduce the likelihood of workers unfairly competing against you without using clauses that may not hold up in the Hawaii civil courts.
Making changes to your employment contracts may help in the future, and reviewing your current non-compete agreements to ensure that they meet the strict standard for being enforceable can also help. Tracking changes to employment law at both the state and federal levels will be crucial for employers that want to limit their exposure through non-compete agreements or similar employment contract inclusions.