A restrictive covenant that is in force during a vesting period for securities granted as part of an employee incentive program may present an issue for enforcement, if not tied to to the protection of an employer’s legitimate interest.
A court considering a preliminary injunction request blue-penciled the duration of a covenant not to compete or solicit customers to base the time period on termination, not the vesting period for stocks and options sought by the former employer.
The duration of a restrictive covenant may not be reasonable if the duration is not tied to the former employer’s protection of a legitimate interest.
Restrictive covenants that were tied to the vesting and exercise schedules pf securities awarded through United Healthcare’s employee incentive programs were not reasonable, a federal court held recently. The court then limited the duration of the time when a former employee would be restricted from competing with or soliciting the company’s customers.
The case involved a former executive, Jeffrey Corzine, who worked in strategic marketing for United in its program offered as an option in Ohio’s Medicare program. Corzine was terminated by United in a corporate reorganization and then went to work for a competitor, Humana, Inc., during the time that both companies were competing under a Request for Applications (RFA) for contracted Medicare services. The case was before a federal district judge on United’s application to secure a preliminary injunction. Continue reading