A non-compete agreement can be a powerful way to protect your business and its trade secrets. Here, your employee signs a contractual arrangement whereby they agree not to go to work for competitors within a specified geographical region for a specified period of time. This ensures that even if your employee leaves you, they won’t simply go to your biggest competitor and share everything that they know about your business, including confidential information.
Yet, non-compete agreements are breached all the time. When they are, you need to be prepared to take action to protect your interests. If you don’t, then you could lose your edge in the market. So, what can you do when you suspect that a former employee is in violation of their non-compete agreement? Let’s take a closer look.
Legal challenges related to non-compete agreements
If a non-compete agreement is violated, then you need to be prepared to take legal action. After gathering relevant documents, interviewing key witnesses, and preserving electronic evidence, you should be ready to seek injunctive relief. If successful here, the court will issue an order prohibiting the former employee from working for their new employer and sharing protected information.
Of course, even if you obtain injunctive relief, the damage may have been done. In these instances, you can seek compensatory damages for lost profits and malicious conduct. To support these claims, you’ll need evidence to show your losses and the behavior engaged in by the employee and their new employer.
So, when it comes to issues with non-competes, here are some challenges that many employers face:
- Lack of knowledge that the non-compete is being violated.
- An unwillingness to reach out to the former employee and their new employer to inform them of breach of the non-compete agreement.
- Procrastination due to uncertainty over whether there’s sufficient evidence to obtain an injunction.
- Haphazardly created non-compete agreements that leave loopholes for former employees and competitors to exploit.
An example of how non-compete litigation works
To see an example of how litigating a non-compete agreement can protect business interests, let’s look at one recently settled lawsuit out of the insurance world. There, an Allstate insurance agent left her employment and opened a competing insurance company less than a mile away from her former employer. The former insurance agent also allegedly took a confidential Allstate customer contact list. Both actions, according to Allstate, were in violation of a non-compete agreement signed by the insurance agent upon her employ. Allstate subsequently sent her what appears to be a cease-and-desist letter, at which time the agent moved her office out of the restricted territory. However, Allstate claims that she continued to utilize confidential information that she took from them.
During negotiations, the former agent agreed to injunctive relief, allowing Allstate to protect it customer lists and prevent the former agent from attempts to poach those customers. Allstate’s strong actions here led to a positive outcome, even without the need for full-blown litigation. This is a great example of why policing your non-compete agreements and acting quickly on violations is imperative.
Protect your interests in your non-compete agreement
A non-compete agreement can be a strong way to protect your business interests. But to successfully utilize them, you have to know how create legally valid agreements, effectively police them, and implement litigation strategies that work.