Question

restrictive convenants of Lululemon such as non- competition , non- solicitation provision.

Answer 1

Ans:-

Non - competition

Non-competition clauses provide another direction to come into protecting the legitimate interests of the business.

Non-solicitation clauses, non-dealing clauses and non-poaching clauses each protect a business from competition in their own particular way.

They drill into and prohibit specific acts. The methods tend to be (or should be) refined.

Competition clauses are wider in application. Much wider.

It’s one thing to say that a Leaver won’t attempt to entice away a Prohibited person from Protected Business.

It’s quite another to say they the Leaver will not compete with the Protected Business at all.

It’s pretty difficult to appreciate the approach of courts to non-competition covenants without knowing at least two things:

1. The public policy basis of why courts are generally so unwilling to enforce non-competition clauses.
   That public policy is “the greater good” of fostering competition amongst allbusinesses and recognition that it is free movement of employees between businesses that allows that to happen, and
2. The limits to protection of confidential information law.
   Not all confidential information is able to be protected by restrictive covenants

How confidential information is protected

For the purposes of restrictive covenants, there are 3 types of information. Two can be protected, and the other can’t.

• Trade secrets and highly confidential information similar to a trade secret.
• Information which is confidential, but which does not fall into the class above, because it forms part of the professional expertise of the Leaver gained as part of an employment relationship.
  That is, confidential information which forms part of the employee's:
  • stock of skill, knowledge and experience, or
  • dexterity, manual or mental ability

The skills and knowledge of the employee are seen to be the employee’s. Not the employer’s. Where there’s an overlap, the employer usually loses.

• Information which is not confidential at all.

Example non-competition clause:

You agree not to directly or indirectly compete with the business of the Protected Business during the period of employment and for the leaving period and notwithstanding the cause or reason for termination.

The term "not compete" shall mean that you shall not own, manage, operate, consult or be employed in a business substantially similar to or competitive with, the present business of the Protected Business.

2. Solicitation provision.

direct and specific appeal to a customer or supplier rather than a more general approach

To draw the contrast, in one case an advertisement in the local newspaper was not sufficiently targeted to amount to solicitation.

Non solicitation clause:

• are a type of restrictive covenant
• included in contracts of employment, contractor agreements and share purchase agreements
• to protect the workforce of a business
• post termination: after the employee, contractor or seller are no longer associated with the business.

Non-Solicitation Agreements

Non solicitation clauses can appear in employment contracts, service agreements, contractor agreements and share purchase agreements: ie contracts for the sale of a business.

What do non-solicitation covenants protect?

Non-solicitation clauses are primarily directed at protecting [trade connections].

Businesses are entitled to prevent ex-employees, ex-consultants and former business owners (ie leavers) from exerting influence of this kind over their clients and customers.

They prevent a leaver requesting, attempting to persuade or encouraging customers and suppliers to transfer their business to another business.

Non-Solicitation Period: Duration

The time period that a non solicitation restrictive covenant lasts is likely to be a persuasive factor in the enforcement of a restrictive covenant: 6 months in most industries is considered short and therefore more likely to be enforceable.

An example of a simple non-solicitation clause reads like this:

During the term of this Agreement and for a period of 12 months after termination the Leaver will not either on its own account or for any firm or company other than the Protected Business solicit, canvass, or entice away from any person, firm, company or organisation which has dealt with the Protected Business in the 12 months prior to termination