Who Cares About Non-Competes
WHO CARES ABOUT NON-COMPETES? Fellow business owners, attorneys, corporate counsel and the hard working employees out there, recently there has been a lot of talk about non-competes. California banned them, Joe Biden banned them, and just recently the FTC banned them. It is important to understand that most of the employee retention strategies remain intact.
WHO CARES ABOUT NON-COMPETES? As a practioner I have rarely seen non-competes enforced. For many years now I feel they have been a throw in item, added to a long list on a demand letter or in a complaint.
John Widget Co is unlikely to sue Sally Widget (Sales Manager) personally to obtain meaningful protection. While there is some deterrence factor in filing a lawsuit. If that lawsuit reaches conclusion neither the employer (left with a massive legal bill) or employee (left with a bill they cant pay) is happy.
Instead my target would always be Sally's new boss, Evil Widget Co. My goal in my letter to Evil is to outline facts that I believe to be true and place the new company on notice of said infringements. Consider it a warning shot. Are you sure you want to take our employee who is actively stealing from John Widget Co? We will sue you and your pockets are deep enough to pay. That is a meaningful threat.
So what claims does John Widget Co potentially still have:
Claim 1. Violation of Non-Solicitation Agreement. This is a contract not to steal clients or employees from your existing employer. This is very much still valid. So while the employee cant be sued for leaving, you can be sued for poaching. You can be sued for stealing a customer list.
Claim 2. Breach of Non-Disclosure Agreement.
If you take John Widget Co's secret information and take it to the new company that is stolen material. Even if you are the author the material at your previous company, a well drafted employment agreement ensures that you give up all rights to that material. That means when you leave and go to a new company you cant take that valuable idea you had. In other words the most valuable efforts of your last several years are left behind.
Claim 3. State law trade secrets/unfair competition/ computer crimes. Company Trade Secrets can be very broad and often protected by state law. If you steal John Widget Co's secret recipe for widget your are liable. Most likely you accessed the network and downloaded confidential information. There are big penalties for each of the above.
At the end of the day when I write your new employer outlining the very serious claims above, I need not even mention a non-compete. But your employer is forced to investigate and do a risk analysis, arguably that employer now has an affirmative duty to protect John Widget Co’s rights after being put on notice. When hiring a newly "free" employee ignore the above claims at your peril, your competitors lawyers surely wont.
