Monthly Archives: March 2017

Trans-Obligation: The Non-Disclosure Agreement (NDA) is Really a Non-Compete.

A handsome young businessman tied up and sitting at his desk

So, an employee signs an employment agreement.  The agreement contains (among other things) non-compete provision and a non-disclosure provision (NDA).  The employee wants out of both obligations.  Otherwise, his ability to earn his best living will significantly be restrained by each.  

If the NDA actually is read literally then every bit of the industry related information is defined as his former employer’s “Confidential Information.”  If enforceable, he would be completely prohibited from using it anyway or at any time.  Wow. This NDA is really a non-compete dressed up as something appearing more innocent.

On March 1, 2017, the South Carolina Court of Appeals confronted a similar set of facts when it invalidated an employment agreement containing a noncompete and NDA. In Fay v. Total Quality Logistics, the Court of Appeals found the definition of “Confidential Information” in an employment agreement’s non-disclosure provision was so broad as to function as a non-compete.  Because an enforceable non-compete agreement requires a reasonable time limitation and because the non-disclosure provision lacked such a time limitation, the Court of Appeals held the entire agreement unenforceable. 

It’s a bird.  It’s a plane.  It’s Muckenfuss.

The Fay decision reaffirms the public policy recognized in Muckenfuss: the right to pursue our greatest worth.   South Carolina appellate courts have demonstrated a consistent recognition of this “right to work.”   Courts subject restrictive covenants and non-disclosure agreements to close scrutiny in deference to the public policy in favor of competition and in defense of this:

“[T]he right of an individual to follow and pursue the particular occupation for which he is best trained is a most fundamental right. Our society is extremely mobile and our free economy is based competition. One who has worked in a particular field cannot be compelled to erase from his mind all of the general skills, knowledge and expertise acquired through his experience. These skills are valuable to such employee in the marketplace for his services. Restraints cannot be lightly placed upon his right to compete in the area of his greatest worth.”  Carolina Chemical Equipment Company v. Muckenfuss, 322 S.C. 289, 471 S.E.2d 721 (S.C. Ct. App. 1996).

Bottom line: Regardless of its form, a contractual infringement on the right to work must be no more than is absolutely necessary. If the infringement goes any further, the agreement will be invalidated.

Let’s chalk another one up for the good guys!