Under what circumstances are the trainee covenants in the agreement with Cinch I.T. not enforceable?
Cinch_I_T Franchise · 2024 FDDAnswer from 2024 FDD Document
Except to the extent prohibited by the laws of the state where the Franchised Business is located or where the Trainee lives or works, in order to protect the goodwill and unique qualities of CINCH I.T.
SYSTEM and the confidentiality and value of Franchisor's Trade Secrets, and in consideration for the disclosure to Trainee of Franchisor's Trade Secrets, Trainee further undertakes and covenants that, during the time he is employed by Franchisee, he will not:
(a) Directly or indirectly, for himself or through, on behalf of or in conjunction with any person, partnership or business entity, engage in or acquire any financial or beneficial interest in (including interest in business entities, partnerships, trusts, unincorporated associations or joint ventures), advise, help or make loans to any entity involved in business which is the same as or similar to that conducted by CINCH I.T. which Business is, or is intended to be located, within the United States; or
(b) Divert or attempt to divert, directly or indirectly, any business, business opportunity or client of Franchisee's Business(s) to any competitor.
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Except to the extent prohibited by the laws of the state where the Franchised Business is located or where the Trainee lives or works, in further consideration for the disclosure to Trainee of Franchisor's Trade Secrets and to protect the uniqueness of CINCH I.T.
SYSTEM, Trainee agrees that for two (2) years following the termination of Trainee's employment with Franchisee, Trainee will not without the prior written consent of Franchisor, divert or attempt to divert, directly or indirectly, any business, business opportunity or client of Franchisee's Franchised Business(s) to any competitor.
Source: Item 23 — RECEIPTS (FDD pages 60–269)
What This Means (2024 FDD)
According to Cinch I.T.'s 2024 Franchise Disclosure Document, the trainee covenants regarding non-competition and non-solicitation are not enforceable to the extent prohibited by the laws of the state where the franchised business is located, or where the trainee lives or works. This means that if a state's laws have stricter regulations or outright prohibitions on non-compete or non-solicitation agreements, those laws will supersede the terms outlined in the Cinch I.T. agreement.
This provision is included to protect the goodwill and unique qualities of the Cinch I.T. system, as well as the confidentiality and value of the franchisor's trade secrets. The trainee acknowledges that they are receiving access to these trade secrets and, in return, agrees to certain restrictions during and after their employment. However, these restrictions are subject to the legal limitations of the relevant state.
For a prospective Cinch I.T. franchisee, this means it's crucial to understand the specific laws in their state regarding non-compete and non-solicitation agreements. They should consult with legal counsel to determine the enforceability of these covenants in their particular jurisdiction. This will help them understand the actual scope of the restrictions placed on their employees and contractors and ensure compliance with local laws.
It is important to note that the trainee still has obligations to protect Cinch I.T.'s trade secrets and confidential information, regardless of the enforceability of the non-compete and non-solicitation clauses. The trainee must maintain the confidentiality of the trade secrets, use them only in the course of their employment, and not disclose them to unauthorized parties.