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Episode 5: Business Law Advice from Marc Gross, Partner at Fox Rothschild

What You Will Learn:

  • What makes a legal contract
  • How to avoid email legal troubles
  • Having a proper buy/sell agreement
  • Information on restricted covenants, post employment and producer contracts

In the latest episode of the Secret Sauce Podcast 365, we speak with Marc Gross, Partner at Fox Rothschild about some important law topic regarding your business.

About Marc J. Gross

With nearly three decades of experience, Marc focuses his practice on business litigation, business counseling and the management of legal issues in crisis situations. Marc has extensive trial and appellate experience and is highly regarded as a creative and tenacious litigator. His advocacy spans a wide range of practice areas, including partnership and corporate conflicts, trade secret issues, real estate disputes, shareholder and franchise matters, employment issues, trust and estate matters as well as other complex commercial disputes with an emphasis on high stakes litigation. For more than 25 years, Marc has applied razor-sharp instincts to jury and non-jury trials, provided perceptive appellate advocacy, made abundant appearances for emergent relief on “bet-the-company” litigation and shrewdly negotiated favorable settlements for countless clients. Marc also routinely supplies ongoing business counseling to a diverse clientele that includes entrepreneurs, closely held family businesses, automobile dealerships and real estate and technology ventures. Marc has appeared in federal courts throughout New Jersey and New York, and in the Superior Courts of New Jersey in nearly every county. He has served as lead counsel in matters throughout the New York metropolitan area and across the U.S., including California, Kansas, Nebraska, Nevada, Pennsylvania and Vermont. Marc has also appeared as a panelist in forums for the legal profession, written articles on hot topics in business litigation and provided legal commentary on local television news broadcasts.

Before Fox Rothschild

Prior to joining Fox, Marc was a partner and led his practice group at a New Jersey law firm. He also previously worked as a law clerk for The Honorable Serena Perretti, Superior Court of New Jersey, Law Division, assisting in both criminal and civil matters.
Beyond Fox Rothschild

Beyond Fox Rothschild

Marc was elected President of the Essex County Bar Association, the state’s largest county bar, and has served as Chair of the New Jersey State Bar’s Federal Practice and Procedure section. Additionally, Marc has actively served as Chairman or President of several nonprofits, including the North Jersey Business Council and Parkinson’s Heros, Inc.


Intro (00:00):
Being proactive, not reactive gives every business owner the opportunity to think through and make the best decisions for their business. With our world as busy and confusing as it currently is, even the strongest, most seasoned business owners might find themselves reacting to issues that they didn't see coming. With his 30 plus years of experience, helping business owners make the right decisions, your host, Stan Hladik.

Stan (00:26):
Welcome everyone to Secret Sauce 365, where we give you the answers that business owners ask themselves questions on every day. And we are going to tackle the legal environment here. With todays guest, I'd like to welcome Marc Gross partner at Fox Rothschild. Good morning, Marc.

Marc (00:48):
Morning, Stan. Thank you for having me.

Stan (00:51):
Oh, you are more than welcome. You can be a guest on this show anytime. I always enjoy spending time talking to Marc and picking his brain. He's one of the most intelligent people I know, and he is the master litigator best litigator on either the east or west of the Mississippi River. So our listeners are very lucky to have you today, Marc. And we appreciate you taking time out of your busy schedule to join us. And on today's episode, we're going to learn the following in regards to legal, we're going to learn what exactly makes up a legal contract. We're going to learn how to make sure email does not get you into big legal trouble. We're going to learn about having a proper buy-sell agreement in place for your business. And we're also going to touch base on restricted covenants, post-employment things and producer contracts. So before we get started into all those topics, our listeners are going to really enjoy hearing about Marc. Can you just tell us, how did you become an attorney? What brought you into the field?

Marc (01:57):
Oh Stan, it goes back to really my childhood and my most formative years when I was a little kid, some of my earliest memories are of my grandfather and father talking about issues with our family's business. And over my right shoulder here is an inspirational photograph. It's my grandfather. And he was an immigrant. He came to the US by himself when he was about nine-years-old.

Stan (02:24):
What was his name Marc?

Marc (02:26):
Louis Gross.

Stan (02:26):
Louis Gross. Nine-year-old Louis Gross coming to America.

Marc (02:31):
And my grandfather relayed to me through all of my childhood and into my adult years, how he wanted to go to school, which he never did and how he wanted to be a lawyer, he would say more than he could breathe. And he became an entrepreneur here in the United States, the land of opportunity and owns businesses and a family business. And dad became a part of the business and didn't go to law school. And my uncles went into the business and law school, but I made that leap.

Stan (03:06):
So, Louis Gross was a very successful businessman, but he and his children, none of them were attorneys.

Marc (03:13):
That's correct. And we would talk about business issues and family issues. Unfortunately they would become intertwined over dinner and family holidays. And I became a business lawyer and funny enough, the focus of my practice is representing family owned and closely held businesses.

Stan (03:31):
Excellent. And that's perfect for this podcast because that's what we do. We talk about business issues around the table. It's all about the food, right, Marc?

Marc (03:41):
Well before the pandemic, it was all about the food, Stan, when you and I could grab breakfast at any time of day. And I'm looking forward to sharing some pancakes with you again, my friend.

Stan (03:52):
I do look forward to that. So it's takeout for now. So, you decided to become a lawyer and you know, how did that go? How'd it start?

Marc (04:01):
Well, I've loved it. I don't look at it as being a job. It's a passion of mine. I don't feel like I've worked a day in 25 years. I love what I do. I love trying cases, although I maybe try three or four cases a year, which is considered a lot, most settle. Family disputes tend to go the distance if there's something else involved other than money, when you have one family member, unfortunately looking to prove a point. But other than that, most cases resolve themselves.

Stan (04:33):
A lot of times, pride will get in the way of you know, an intelligent compromise,

Marc (04:38):
Sometimes more than pride. It's a son who wants to teach a brother or a father a lesson, and the family dynamics can sometimes get in the way of reason. And what's best for a business.

Stan (04:50):
Revenge. Right? Yeah. So let's talk a little bit about what makes up a legal contract. A lot of people think, well yet you have to, you know, write something on paper and put all the fancy words together, but break it down for us. When do, when do legal contracts come into play?

Marc (05:08):
So you know, a contract can just be a handshake. It can be an exchange of emails especially in business. There are very few types of agreements that need to be in writing and signed by both parties. I mean, typically it's left to prenups or guaranteeing a debt or buying a house. But other than that, if you're going to enter into an agreement with somebody, for business, you can shake hands and perform. And typically what's going to be evidence of the agreement is how the parties performed. So you don't always need, and actually hardly ever need a document signed by the parties for a court to find an enforceable agreement.

Stan (05:53):
So you're saying it could be as simple as a verbal exchange, a handshake, an email and a reply. Someone promises this for that. And that actually becomes legally binding?

Marc (06:06):
Oh, for sure. I have had cases where emails were sent involving buying a company where a client of mine was interested in buying a company and conducting due diligence up in Vermont and a court was looking at the emails and the matter went to trial to determine whether these emails constituted a binding contract. So I have a saying that the "E" for emails, the "E" stands for evidence. And you got to be careful with what you write. You can write something that you think is innocuous that's four, or six years later can be interpreted as something nefarious. Typically if you're going to write an email, it's good to think about it that maybe you're writing it for somebody else, like a judge, even though it may be hard to fathom that at the time that you're writing it, but you really have to watch what you write. And take stock, you know, not to be emotional when you're sending those emails.

Stan (07:10):
So many of us you know and that's a good segue for us into email. We just fire back, right? We read something, we get emotional, that's a great point you made. And I'm a big fan of the 24 hour rule where if something's really getting you angry or emotional, it might make sense to digest it, you know, wait to 24 hours sleep on it and then put together the proper reply.

Marc (07:38):
That is a skill set that I'm looking to try and instill not just on the lawyers who work with me, but certainly to business people, when you get an email, you do not have to respond right away and you should not respond right away. You definitely shouldn't hit the reply and write back within the first 30 seconds, no matter what it is, you should wait. And I spend unfortunately, a good portion of my day, clients sending me emails to review, revising them, sending them back, and then asking the client to send the email the next day. And then usually the rush is, well, I want to set up, I want to keep, I want to send it, no relax. There's no rush. In fact, back before there were emails and there was a fax machine you weren't faxing instantaneously. And before that there was mail. So there's plenty of time.

Stan (08:28):
Weeks, weeks went by, right?

Marc (08:30):
There's plenty of time. There's nothing wrong. If you get an email at 3:00 PM to respond the first thing in the next morning, slow it down, take your time, think about what you're writing, because that "E" in evidence can come back and in a deal and bite you. And most of the time, if parties get into a fight and it boils down to, or erupts into some litigation of the time is spent on discovery. Most of the money is spent on discovery, discovering emails, going through thousands of emails, and then asking a party questions under oath about them and what they meant, and what did this mean? And showing back and forth with the emails, it really can be out of control. So my advice is, if there's one takeaway here that, you and I are going to spend time on this morning, it's go slow and calm down, relax with the emails.

Stan (09:22):
Yeah. It's interesting with email and I guess this gets developed as a skill set over time is they're emotionless, right? You don't see the person's face, you don't see their verbal context, was their voice high, low, you know, unless you're putting something in caps or, you know, people do that sometimes, and I think it's really silly. But you know, you really, it's conveying emotion, but you know, the words can be taken out of context. You meant one thing, but it said another. So that's great advice is to really take a breath back and, and not just proofread your email, but see what it's actually saying. And do you want someone, a third party to look at this in a courtroom one day and to say, oh, okay, that's what you meant. So you know, that's really, really great advice. Now, how does an organization go about instituting that culture? I'm sure you're trying to get your clients to understand this, but you know, sometimes organizations have thousands of employees. I mean, should there be something in the office manual about email?

Marc (10:29):
Well, every business should have a document retention policy. One of the problems is that if you get into a dispute and maybe there are some emails that don't look so favorably as to your position, someone will go back and delete some of their emails. Don't do that because it leaves it an electronic trail and a footprint and can be discovered. And if there's and if you're caught deleting emails or having disposed of evidence it's no different than destroying evidence, whether it's electronic or some other format, and you can get into real trouble with the spoliation claim. And that means that a court can hold you to an adverse inference, that if you destroy some piece of evidence, whether it's email or something, else there'll be an inference taken that you were destroying something that was going to be helpful to the other side. It won't make you look good. And parties have been known to lose cases over email destruction.

Stan (11:31):
It's almost like driving under the influence. I mean, if you refuse to take the breathalyzer, you're already guilty. I mean, so I agree with you, you can't delete the emails. You have to leave everything intact.

Marc (11:43):
Businesses should have a document retention policy regarding what you're doing with your emails. And that would be another piece of advice. In terms of formulating an employee handbook if you send an email, and you're an employee for a business, you don't have a right to privacy on that email, even if you're communicating with your lawyer and you're having a fight with your boss and you're owning a business, and one of your employees is sending emails to his lawyer as the owner of that business, you have the ultimate, right. You own that server, no emails on that server are private. And that's often also a foray into lots of evidence as to what employees or officers of a business or co-owners might be doing and doing something wrong. There's no right to privacy on emails that you're sending on your company server.

Stan (12:33):
That's a great point to make is the emails are all owned by the company, not by the individual sending them because it's a corporately owned email address in most cases. Now, when do you find that it makes sense to take it out of the email arena and then into writing? Is there a time for that? Is it based upon the complexity of what you may be doing in a contract? So bringing it back to our first topic, I mean, we covered two here, how email can get you in trouble, but when does it make sense to really maybe memorialize things?

Marc (13:09):
So the purpose for a contract is not that you're going to take it out and constantly looking at it. It's usually pulled out of a drawer a year or two later when there's some question about a deal. And really when you have more and more at stake, a contract, sort of like the insurance policy. And then Stan, I know you can appreciate this. It doesn't cost a lot of money to write the contract, but if something goes wrong and you don't have that insurance policy of a contract, you can be fighting and spending all kinds of money after the fact. So as deals become more complex and more money's involved, it's much better off instead of having it recorded informally to have it recorded amongst the parties formerly. And the way to do that is through a written contract where you set forth the terms and what happens if, and when so there's no mistake, but unfortunately the best contract in the world can't protect you from a bad actor. If you're doing business with someone who has ill intent no contract in the world is going to save you. It may have some remedies in there. It may increase some of your muscle in some respects depending on what the dispute is, but at least you won't be arguing back and forth as to what the deal is. You pull the contract out when there's a problem. And obviously as the risks and rewards go up in terms of what's at stake, you're going to want to spend the time and invest the money in putting a deal together in writing that both parties acknowledge what that deal is and write it down like a house purchase. You're going to want that in writing, buying or selling a business, you're going to want that in writing.

Stan (14:47):
Right, that's a really a great line you had. Not every customer's going to be a good one, right? There's a lot of bad actors out there. And that could be a topic for a future podcast of how to trust your gut, but to kind of finish up on the email topic here. What I think I heard you say is that you know, the contract, if you take it to that last step could really take the vagueness out of an email exchange and dialogue, and really list all the points. And it goes away in a drawer and it's there just like an insurance policy incase there's a problem down the line.

Marc (15:25):
Exactly. I mean, often I'll say to clients, send me a copy of the email that you sent to the other side, that contains the deal points. And we'll memorialize that in a more formal agreement.

Stan (15:38):
Yeah. Is there a point, just so many questions that come in my head, when we start talking about email, is there a point where you like your clients to come to you more rather than you know, they might take the day and then want to reply, but is there a point where they really should check with counsel and make sure they're getting the right words down?

Marc (16:01):
Sometimes you can tell business intuition is everything. Of course, if we're talking about a transaction that involves lots of zeros, go check with your lawyer, because again, it's the insurance policy and it's a lot easier to forecast and take care of the problem as it's happening rather than after the fact. But if you're getting a bad feeling from another side and you can feel it in the back of your neck, the cold pricklies it's time to get a lawyer involved, I think, that would be my suggestion to review an email. It takes 10 minutes to have somebody else take a look at it, revise it, maybe word it a little bit differently and give you some coaching on some points on what to do. So I would rely upon intuition as to when it is you need to bring somebody else in whether it's your lawyer or your accountant, or some other trusted advisor to get another set of eyes on the deal or package or agreement that you're formulating with somebody.

Stan (16:55):
So listeners, you heard that here, right from the source Marc Gross partner of Fox Rothschild, Secret Sauce 365, it's all about the food, trust your gut, trust your gut, and then make a decision. So, Marc, I just want to mention I'm so proud of you and what you've done at Fox Rothschild. Tell me a little bit about the firm, and I know you got you're based in Morristown, right? But you're all over the country.

Marc (17:19):
So primarily in Morristown as a result of of the pandemic, unfortunately. I was spending a lot of time in New York about a year or so ago, and the firm has 27 offices. I've got matters, believe it or not a few in Alabama. I don't know why they're congregating there. I've tried a case in Vermont. The firm has offices on the West coast. I have a matter out of our Palm beach office. I've got a couple of matters out of our San Francisco office. And you never know. I mean my clients most of which are in the New York and New Jersey metropolitan area sometimes do business, as you would imagine out of the New York city area. And if you're going to contract business in Dallas and I have a client doing a real estate deal there, the firm has offices in most commercial centers that would allow me to continue to represent the client. And it's been great for my practice.

Stan (18:17):
Awesome, and I believe the firm can handle all different various types of counsel, right? Anything needed?

Marc (18:23):
I mean, it's a business firm. So anything imaginable relating to a business, intellectual property, trademark, patent, contracts, real estate tax issues, wills, I have clients that are getting unfortunately divorced or we'll handle it beforehand with a prenup, but any imaginable issue that a business owner would face in the conduct of his or her business, it's something that we do. We have over you know, 27 offices, almost a thousand lawyers in every specialty you can imagine. And I don't want to sound like a commercial, but oftentimes I don't have to do research. If someone comes to me with a novel issue, I can send, as we've been talking about an email internally, and I'll find an expert here, that's dealt with the problem and get an answer.

Stan (19:10):
Great. Great. So let me ask you this question because more and more businesses in our country are now transacting with other countries. I assume that there's a myriad of legal issues that get involved with that. And I assume your firm could help, but what should they think about when they start maybe doing business abroad?

Marc (19:35):
So, one of the number one issues is if you're doing business abroad whose law governs? I did a deal within the last few months in the fall. I closed in August, September after Labor Day where a multi-national business with significant presence in China was buying one of my clients. And one of the issues in contention during the course of the deal. And one of the first things we needed to see if we could agree upon is whose law controlled, because as you're crafting these documents, you need to craft them with that in mind. Does the law of the state of New York apply? Does the law of Delaware apply? Does the law of the Hague Convention apply which is an international conference among countries that signed on to a treatise? Does the law of China apply to the extent that China is not as strict in terms of enforcing their intellectual, in terms of anybody enforcing intellectual property rights. In that matter, we determined for whatever reason that all disputes would be handled and resolved in accordance with the law of the UK and resolved by arbitration in London. And it's just a...

Stan (20:54):
Neutral third party, I guess.

Marc (20:56):
No, no, but it's just a deal point that the parties worked out my view far better than having the dispute resolved in China. But the other side absolutely didn't want the dispute resolved in the US by court. So one of the first things you should look at, if you're going to be involved in an international transaction is what law applies and what are you going to do if there's a fight?

Stan (21:20):
I would assume if for some reason, someone goes ahead and does that, that the law would govern with the foreign country, whatever their courts determined is legally binding here in the US?

Marc (21:35):
Well, that becomes very complex as to choice of law provisions and whose law applies and the US has typically most States have a choice of law analysis. When you determine I'm not going to bore you or the listeners, but you can get into a fight if you don't agree beforehand as to whose law applies. And where's the dispute going to be governed.

Stan (21:56):
Well, certainly that would determine the need for counsel and any time you're going to start transacting business outside the country, without a doubt, you know, please call Marc and his team. So talk about complexity. Let's go into when, you know, you're trying to figure out down the line, you got a couple of partners that you need to have an agreement in place, a buy-sell agreement. How do they start? What do they look at?

Marc (22:24):
Well, one of the things that I like to talk to clients about when you have a buy-sell, or you're a group of family members, or a group of friends or partners forming a business, everybody's usually getting along in the beginning. And what I ask is what is this going to look like if you're not getting along? And how do you want to resolve an issue? If let's say there are three of you, and one of you is a little bit older and is starting to work less and less and less, and taking more time off and moving to Florida, usually there's animosity that follows, and how are you going to resolve that animosity so the business can continue if those circumstances pose as a threat to business continuity?

Stan (23:12):
So, it's almost making relationships as you go along before you can even get into the contract itself.

Marc (23:21):
When, you're thinking about moving forward with the business, and you tasked the lawyer with drafting an operating agreement, one of the things you want to think about is think of that maybe as a prenup, what's it going to look like? And what's this business going to look like? God forbid, if the three of you are not getting along, how are you going to vote out or get rid of, or squeeze out or repress, so they no longer are a problem or getting in the way of the business as it moves forward and your operating agreement or shareholders agreement, the number one issue that I see lacking in shareholder agreements or operating agreements, when people come together to form a business are the dissolution provisions. What are you going to do if there's a problem, how are you going to value this thing? And how are you going to vote or get somebody out that no longer belongs in the business?

Stan (24:15):
Understood. Those are key components that really need to be addressed, you know, before they're problems?

Marc (24:20):
How are you going to protect yourself if two other of the owners are ganging up on you? And so these are some of the most important provisions that I see are often not addressed in shareholder or operating agreements. And I wish they were addressed more often. It would save business owners, lots and lots of headaches and sleepless nights.

Stan (24:40):
And even if they are addressed I just like to point out to my listeners that you put that in a drawer for later, but you do need to update the valuations, you know, maybe not annually, but at least from time to time, correct?

Marc (24:57):
Yeah. there should be a valuation mechanism that remains relevant because it's not going to come up year one, it never comes up in year two, hardly by year five. It's like you said, put it in a drawer on 10 years later, when someone where someone's kid becomes a problem, or someone passes away, or someone's wife becomes a problem, and you got to pull out the agreement and look at it, and not only how do we alleviate ourselves of the problem, the dissenting shareholder, but how do we value the business and pay, what is it that we're going to pay that constitutes some fair value to get rid of the problem.

Stan (25:36):
Do you need sometimes to have separate counsel? I mean, if you had, let's say two brothers, a sister, and a father, is that common? Where, or is it always, really just one counsel trying to make everybody a happy family?

Marc (25:51):
I mean, I've just done it this past week where three best friends from college days, and now they're in their late twenties, early thirties are forming a business together in South Florida. And I was brought in to serve as counsel and to help them formulate their operating agreement. And I was brought in by one of the families and what the other two do is they acknowledge that I'm serving as a corporate counsel for the entity and that I had previously represented one of the families independently. And I may go on to continue representing one of the families independently or the other two independently. And they agree to waive the conflict if they'd like for me to represent the entity in its entirety, in the formation of its business documents, or everybody can get their own counsel and negotiate amongst themselves. That latter process obviously is much more expensive and takes more time. It's much more streamlined if we're engaged to represent the company and just do what's best for the company.

Stan (26:56):
Yeah. So as long as there's constant communication, transparency being the key, you know, have one person dealing the cards. It saves expense, but gets the buy-sell agreement in place properly would like to point out always to our listeners that these agreements, when you look at it, sometimes valuations can be staggering and life insurance is a key component. You could put some inexpensive term life insurance in place on key individuals to help fund the mechanisms. Should there be, you know, a potential death to one of the partners?

Marc (27:30):
Well, it's often a leading component of a buyout because if you have a business with three owners and one passes away, typically the other two don't want to be partners with the decedent's wife. And so life insurance is a mechanism by which you can buy out that third deceased former member and move on with the business.

Stan (27:55):
Just transfer the financial risks over. Good stuff there, Marc really something that a lot of business owners, I think it keeps them up at night and these are questions they ask themselves every day. And I know you can solve them. Let me just give you the hypothetical and this is not meant to scare business owners, but if they don't do this and then there is a fatality or a disability or dissolution request of one of the partners, what happens? I know it gets ugly, but just let people know what happens.

Marc (28:32):
Look, if parties are not getting along and there's no guiding document, or the guiding document is silent as to what happens in a sense where the parties are not getting along, it could mean years of litigation and hundreds and hundreds of thousands of dollars in attorney's fees and expert fees to value the business. And you are so far better off spending less than $10,000, oftentimes less than $7,500 in putting together an operating agreement or a shareholder agreement for your business, that's generating millions for you and your family. Then years later fighting about it. I've tried a lot of cases where there are owners of businesses fighting amongst themselves for control of customers intellectual property, and for control of the business. And you are far better off having a document it's the insurance policy if something goes wrong. You're far better off having that than fighting for years.

Stan (29:37):
That is excellent advice. So anyone who's been on the fence, been thinking about or hesitating do this immediately, you have to get an agreement in place because while it's a tough thing to discuss, sometimes amongst family members and partners, it's better to do it now because it'll be a lot costlier later on, and a lot more fighting.

Marc (29:57):
It's usually easy to get done when people are getting along. There are common provisions and agreements that we recommend. We plug them in, everybody looks has their chance to put in their 2 cents, review it, revise it. If you want to get independent counsel, go get independent counsel, look at the agreement, let's get it done, sign it, and then put it in that drawer. And hopefully you never take it out.

Stan (30:18):
There you have it listeners Marc will write the agreement, I'll write the life insurance policy. It'll all be done within 30 days. Let's tackle one of the other topics I promised our listeners in the beginning of the episode that we were going to discuss. And it's one that people question all the time on restricted covenants, non-competes why don't we talk about that for a little bit, Marc.

Marc (30:42):
I recommend to my clients that have significant customer bases, that they should have post-employment restrictions on their employees who deal with customers it's just something that should be done.

Stan (30:56):
All employees, not just rainmakers all the way through to service level.

Marc (31:00):
My suggestion is that anybody that has access to the confidential information to the customer list, anybody that has access to that should be bound to the post-employment restrictions. If the business is customer oriented and you're having access anybody that has access should be bound if the business is technology related and there are those that have access to the technology, those are the individuals that should be bound. The purpose of the post-employment restrictions is to protect the business's confidential information, those that have the access and the ability to take it and go, should be bound to the post-employment restrictions.

Stan (31:41):
Great advice now to implement that, I know a lot of office manuals, including ours has a confidentiality clause. Is that something that, you know, needs to be signed by the employee, or what do you recommend there?

Marc (31:56):
So there are a bunch of ways to do it. You can do it the way that we all know which is the restrictive covenant in an employment contract you can help protect your confidential information by having a provision in your employment agreement that has the business's confidentiality policy or confidential information policy, and just make sure you keep records that every employee has acknowledged receiving the handbook with that policy in it while your employment agreement is always the best way to do it. If you're not going to have employment agreements, designating those that have access to the information signing post-employment restrictions, certainly every business in its employee handbook should have a confidentiality provision describing what the confidential information is or at least what the business considers the information to be confidential. And the restrictions, specific restrictions that every employee knows they're not to use it, disseminate it, transfer it, sell it, or do anything with the confidential information that may come into their possession except to use it to discharge their duties as an employee or owner or shareholder.

Stan (33:10):
Very important covenant for people to have in place. I've heard, you know, horror stories.

Marc (33:16):
I hear from people, oh, they're not enforceable or not enforceable for more than a year. Or I heard they're not enforceable for 18 months. No, they are enforceable. Most commercial states, New York, New Jersey. These post-employment restrictions are enforceable. Now, there are ways you can get out of it, and we can go into some of the nuances of it, but typically you can restrain somebody for two to three years, and it depends on the industry with a reasonable geographic scope and prevent them from competing with your business. And that becomes a significant sword in protecting your confidential information, protecting a sales manager or a salesman from leaving and stealing what you have worked hard for.

Stan (34:01):
And we need to protect our listeners here. I mean, they've worked hard sometimes, you know, generations before them building up the business and one bad actor could kind of take that out. So, you know, I think you recommend with you know, pretty much the maybe main rainmakers in an organization, the leading salespeople to have a complete contract in place, with that restricted covenant, correct?

Marc (34:28):
Absolutely. But one of the nuances of this, of this field of law is that if you have a team of 10 salespeople, let's say, and two are your best rainmakers, if you only have post-employment restrictions with those two, those two post-employment restrictions may be deemed invalid and unenforceable because you didn't have them in a uniform means among all of your salespeople, all of whom had access to the confidential information.

Stan (35:00):
Wow. Wow. You're saying they could be discriminatory because you didn't do it across the board.

Marc (35:05):
Well, the whole basis board is why these two, right? You must not consider the information that you're looking to protect so super secret if only these two super rainmakers are restricted from their post employment conduct, but everybody else can go and take the list or go and compete. No, you've got to employ this in a uniform manner.

Stan (35:28):
That's great information. Yeah, because you think, okay, I have to do it here and here. And I know a lot of people, at least in my and insurance, they didn't want to put a contract in place. They didn't want to, you know, maybe give equity or stock in the organization, which would have been part of that discussion. So they did contracts with some and not contracts with others, that's a great piece of advice to do it across the board, because you don't want to leave any gaps with something like this.

Marc (35:57):
And your post-employment restriction can be deemed unenforceable. If only one or two people in the organization have it, you have to be careful with it and you have to enforce it and you have to enforce it uniformly. If you have it for everybody and one person leaves and it's not hurting you and competing, and you'll let them compete and go. And then somebody else who leaves six months later, and that person is hurting you, the person who just left recently can use this as defense that you're not enforcing these. So they must not be worth much to you and use that as a means to avoid the enforceability of the restrictive competence.

Stan (36:36):
Take it from the master litigator. He's seen it from all angles and he's...

Marc (36:40):
Oh, I do this often.

Stan (36:42):
He's trying to help you cover your gaps listeners. So take him at his word.

Marc (36:45):
And I'm able to enforce post-employment restrictions frequently. And even when a business does not have a post-employment restriction with a key employee, we're often able to stop that departing shareholder owner or employee from pillaging, the business's customer list or technology and competing unlawfully. I wrote an article about it recently the secrets of trade secret litigation.

Stan (37:14):
Double secret. I love it.

Marc (37:18):
And if you're a business that has trade secrets and most do, whether it's the simple customer list or some software or technology, or just the manner and methodology that you do, business, which you've developed over the course of decades, it's something you want to protect and courts will protect you.

Stan (37:37):
Listeners Marc Gross knows the secret. And that's what we do here on the Secret Sauce 365 podcast is we give you answers to the secrets that other people don't want you to know. Marc, I can't thank you enough. You've given us a wealth of information you know, just from the use of email to just really, you know, things that struck me here is just to slow down, right? We're in a business environment on a daily basis, you know, sometimes you're waking up 6:00 AM to text messages and we didn't even get into that topic. Maybe that's a future podcast. We'll talk about the validity of text messages, but emails, phone calls, everybody wants instant gratification. And it's not like the seventies or eighties where you could take time to do replies and responses, but you really need in some of these situations, especially like you said, if you're dealing with a bad actor and you get that cold sweat or your stomach turns you need to take your time, you need to get counsel and you need to make sure things are buttoned up right.

Marc (38:48):
I agree. Definitely. You're far better off protecting yourself in advance of the problem than having the cleanup after the fact.

Stan (38:58):
Yes. And no one wants to go to court and have their words taken out of context. So, to our listeners out there, I appreciate you sharing your time with us today. And we want to all thank you, Marc, for being with us. We wish you and your family continued success and prosperity and good health. So thank you very much for your time.

Marc (39:22):
And my best to you and your family.

Stan (39:24):
Thank you.

Conclusion (39:24):
Thank you for listening to another episode of Secret Sauce 365. Your feedback is how we grow, so please leave us a rating and review on your favorite platform. And if you want access to even more great information, go to secretsauce365.com.

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