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Violations of Non-compete Agreements

Violations of Non-compete Agreements

A non-compete agreement is an agreement between an employer and employee that restricts an employee’s conduct post-employment. In a non-compete contract, the employee usually agrees not to compete against his/her former employer for a set period of time.  Competition can include using trade secrets, contacting past clients, and working for rival companies.

How to Deal with a Suspected Violation of a Non-compete Agreement

Review Non-compete agreement under the Defend Trade Secrets Act and State Law

In addition to bringing an action as a state claim, an employer may have a federal claim against an employee for misappropriation of trade secrets that occur on or after May 11, 2016 under the Defend Trade Secrets Act.  Additionally, an employer may recover compensatory or punitive damages.

Promptly Investigate Suspected Violations

While reviewing your non-compete agreement, you should promptly investigate the suspected violation.  A few strategies for investigation include:

  • Consider all relevant facts
  • Investigate the extent of suspected activity
  • Consider interviewing the employee and other witnesses

Formulate a Strategy

When dealing with possible violations of non-compete agreements, you have to generate a strategy for handling the issue.  Decide whether you would like to pursue informal or formal legal action. Informal legal action can include sending a cease and desist letter and alerting the employee’s new employer of the violation. However, be mindful that if such allegations are inaccurate and the new employer fires the employee, your company may be liable for defamation.  Similarly, you can consider discontinuing severance payments if stopping the payments will not allow for a breach of contract claim.

File for Injunctive Relief

If you wish to take formal legal action, you may file for injunctive relief such as a temporary restraining order (TRO), permanent injunction, etc.  An injunction prevents a person from continuing an action, in this case prevents violation of the non-compete agreement.  Furthermore, employers may have further causes of action against the past employee potentially for: breach of contract, interference with business relations, misappropriation of trade secrets, and other causes of action.

Review Non-Compete Policies and Minimize Risk of Future Violations

All employers are at risk of potential violations for non-compete agreements.  It is important to consistently review non-compete policies to ensure their enforceability.  This is especially important to employers who have employees working in different states.

Contact an Attorney

Not all non-compete agreements are enforceable.   An employer should look to states law to determine the enforceability of their non-compete agreement.  Similarly, regulations can vary significantly in different industries, so it is important to consult professionals about the issue. Violations of non-compete agreements can be particularly challenging to deal with, so we recommend that you consult an experienced attorney.  If you have questions about non-compete agreements please contact us.

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