Question 1

Violating Non-Compete Clauses

Accepted Answer

As an employer, you may have established legally binding clauses in your employment contracts that prevent an employee after termination of employment from working in a particular field or area of business, for a specified period of time, within a specified geographic area. While some states, such as California, have issued a complete ban on non-compete clauses and rendered them unenforceable, many other states still legally enforce these contractual agreements between employers and employees. Across the nation, a trend is moving toward limiting broader restrictions in a non-compete clause; however, if a court finds that the agreement was reasonable, not overly restrictive, and made in good faith by all parties, many state courts will uphold the legally binding agreement and allow an employer to sue an employee for breach of contract.

Question 2

Violating Non-Solicitation Agreements

Accepted Answer

Non-solicitation agreements are different than non-compete clauses. Even in states where non-compete clauses are unenforceable, non-solicitation agreements are generally allowed. This agreement will prohibit an employee from soliciting and taking customers from their current employer to obtain the contract in a new job or as an independent contractor after they leave employment. Some of these agreements prevent employees from soliciting companies and businesses for a specific period of time after leaving employment. Employees have a duty to their employer to act solely in the best interest of the company. This common-law duty exists whether or not there is any kind of employment contract. The typical standard for analyzing whether a non-solicitation agreement should be enforced is reasonableness. Attempting to take the top 10 customers with you when you leave is different than finding new customers in new locations that had no prior business relationship with your previous (or current) employer. One path involves the investment of time, money, and effort to market one’s services to new prospective clients and the other relies on piggy-backing on the investments and efforts of their former employer.

Question 3

Breach of Fiduciary Duty

Accepted Answer

Employees owe a fiduciary duty to their employer while they still are employed to act in the best interest of their employer, and with a duty of loyalty. Taking a business deal as an employee (or former employee) that should have been presented to your employer instead is called “usurpation of corporate opportunity.” For example, if an employee holds onto prospective leads and, rather than presenting them to their current employer, brings those prospects to a new employer or their own new entrepreneur venture, they have taken away an opportunity that should have belonged to their former employer. Saving up prospective sales or clients is called “warehousing” and may constitute a breach of fiduciary duty. Therefore, no solicitation or manipulation of contracts or clients before an employee’s departure is legally allowed. Some employment contracts will include a non-solicitation agreement, preventing an employee from soliciting these sales or clients for a specified period of time after employment ends. If an employee takes these opportunities that belong to their employer away, the employer may have a case against them These types of cases where an employer sues an employee typically rest on intentional interference with contractual relations or intentional interference with advantageous business relationships.

Question 4

Violating No Raid Provisions

Accepted Answer

It is common in many industries for an employee to leave a company to go work for a competitor. However, if two or more employees leave an employer to work for a competitor all of a sudden, it may be that one of the employees persuaded or solicited co-workers to terminate their employment and move as a group to the new company. Oftentimes, an employer will have a “no raid” clause in the employment contract, which prohibits any type of solicitation of other co-workers to terminate their employment and move to another competing employer. If this type of action is discovered, an employer may have legal grounds to sue the employee responsible for the sudden exodus of employees under breach of contract.

Question 5

Theft of Trade Secrets

Accepted Answer

While everyone can easily see how the theft of tangible property would be considered illegal, it is important to note that trade secrets are also considered property of the employer. If an employee has taken company documents, proprietary information, thumb drivers, or any other types of data, this is also considered theft. In these cases, the trade secrets are considered to be misappropriated by the former employee. Non-disclosure of proprietary information and trade secrets is typically required in employment contracts. The Defend Trade Secrets Act defines misappropriation as “the acquisition of the trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means,” or “the disclosure or use of the trade secret without express or implied consent.” In cases where a former employee takes trade secrets from a former employer, an employer may sue that employee.

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