Reference no: EM132982132

You are advising the founder of a social media marketing company who has begun to hire top talent to help continue to grow the business. The company offers a competitive compensation package and excellent mentorship, particularly for recent college graduates.

The founder tells you that all employees, regardless of position or level (including the receptionist, assistants, engineers, marketing professionals, IT personnel, and executives), are required to sign an employment agreement with restrictive covenants as a condition of employment. Specifically, they must agree that, upon termination for any reason, they will not start, be more than a 5 percent investor in, or work for any other marketing company of any kind anywhere in the United States for five years. They will also not solicit any of the company's employees for five years.

The company's reasoning for these restrictions is that they are necessary to protect the company's trade secrets and confidential information and to keep larger competitors from poaching the company's best employees, especially as a start-up company trying to get off the ground. The company's founder is asking you whether the restrictive covenants are likely enforceable in most states.

• How do you advise her? What factors should you consider?
• Do you think that the restrictive covenants will impact the company's recruiting efforts?
• Do you think that the restrictive covenants match the company's reasoning/goals?
• What changes, if any, would you make to the restrictive covenants? Why?