Legal to prevent former employee from working with competitor?

If our former employee is moving to a competitor and would inevitably disclose his former employer's trade secrets, can we prevent that former employee from working with the competitor?


Employment Questions

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Trade Secret Questions

in California Posted 6 years, 6 months ago

17 Responses

Profile Picture of Timothy Cornell
Timothy Cornell

Of Counsel at Perry, Krumsiek and Jack LLP

It will be very difficult to prevent a former employee from moving to a competitor. Courts and the law are generally hostile to the idea of restricting a person's freedom to work. You can possibly prevent the employee from taking a similar position at the company, where the disclosure of trade secrets would be inevitable, however. A noncompete agreement would be helpful, if the former employee agreed before working for you that she or he would not take a similar position where trade secrets would be disclosed. You need to consider carefully the nature of your trade secrets and how protected they are, and how specific the terms of your noncompete agreement are - the more specific the better.

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Profile Picture of Glenn Lyon
Glenn Lyon

Partner at MacGregor Lyon, LLC, Business Attorneys

You would need a contract in place that restricts such employment (assuming such an agreement is enforceable in your jurisdiction). However, there are most likely trade secret laws in your state that would apply if the employee discloses such information.

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Profile Picture of Michael Cohen
Michael Cohen

President at Michael H. Cohen, Attorney-at-Law

Non-competition clauses are not enforceable in certain jurisdictions, absent narrow exceptions. For example, non-competition agreements are highly disfavored in California. Trade secrets can be protected, but you should have appropriate language in the employment agreement and, be sure you have taken steps to protect your trade secrets. Some courts will "blue pencil" non-competition clauses that are overbroad in order to make them enforceable.

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Steven Kam

I remember a fairly well-publicized case involving Google, Microsoft, and Kai-Fu Lee from around 2005, which was a pretty high-profile example of a noncompetition case that was thorny enough to result in a temporary restraining order before the parties ultimately settled. Microsoft brought suit in Washington state, which makes enough sense since Lee used to work in Redmond, but I'm thinking that this may be an example where just because CA is friendly to employees and disfavors noncompetition agreements doesn't mean that another state's position on noncompetition won't matter.

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branditant

how about the state of georgia

Profile Picture of branditant

branditant

does the law in the state of Georgia feel as lieniet as far as a worker leaving my crew to work for the general foreman that hired me (us). He lied to me and said we were waiting on materials however they have been working the whole time while I've been waiting for two weeks. well over the weekend I found out my employee has been working since I left.

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Anthony Hanson

testing

Profile Picture of Charles Webb
Charles Webb

Partner at Baker Botts L.L.P.

Picking up on those comments, a covenant not to compete in an employee employment contract has a better chance of being upheld if it is as narrowly tailored as possible with respect to the type of product or service covered (i.e., not extending beyond that which is necessary to protect your company's trade secret), territory, and duration (in general, the shorter the better).

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Profile Picture of Kerriann Sheppard
Kerriann Sheppard

Owner/Managing Attorney at Law Offices of Sheppard & Associates

The best way to protect your company from having employees divulge trade secrets or other confidential information that may be obtained during the course of their employment is to incorporate these restrictions within the employment contract. Most employers use what we call a "Non Compete Clause" to restrict employees from using confidential information against the company or from providing such information to a competitor. Most jurisdictions would uphold a Non Compete Clause if it is reasonable in scope and duration and does not unreasonably prevent the employee from their right to earn a living. Intellectual Property Law also has its own restrictions on the use of trade secrets. It is likely unlawful for that employee to provide such information to a competitor without express consent from the owner as the trade secret would belong to the company, not the employee. If the employee reveals such information that was obtained within the course of employment, then the employer may sue the employee for any damages that may result, and the competitor if the competitor hired the employee for the purpose of unlawfully obtaining such information or had reason to know that the information was not the sole property of the employee. The employer may also be able to obtain an injunction against both the employee and the competitor which would prohibit them from using the trade secret.

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Profile Picture of John Heck
John Heck

Partner / CEO / Founder at Heck Law Firm, P.C.

Although true that courts are reticent to restrain employees from working with competitors, it is important to have either a non-disclosure agreement or non-compete clause in the employee's contract. While broad "trade secret disclosure" may be difficult to prove in court, future covenants that restrict an employee from working on specific projects that invite trade secret disclosure are both provable and enforceable, carrying potential criminal and civil liability. As always, this depends on the laws of your specific jurisdiction.

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Profile Picture of Martin Werner
Martin Werner

Martin Werner Attorney At Law

you may be able to allege torts committed when the former employees left and assert claims for breach of fiduciary duty (against the employee) and the tort of aiding and abetting the breach of fiduciary duty (the the new employer), tortious interference with contractual and business relationships, trade secret misappropriation, conversion, and conspiracy.

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Profile Picture of Paul Goodman
Paul Goodman

Cyruli Shanks Hart & Zizmor

This is going to be very state dependent. In states such as New York (where I practice), it is very difficult except in a situation involving the sale of an interest in a business (for example, a partner in a medical practice might be prevented from working for a competitor when he sells his interest in the practice to his partners). California would even be more difficult than NY.

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Profile Picture of Paul Minoletti
Paul Minoletti

Attorney at Law at Law Offices Paul G. Minoletti

Typically not, you cannot prevent someone from working, but you can prevent disclosure of trade secrets. Hopefully you had a non-dislcosure agreement in place.

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Profile Picture of Albert B. Maggio, Jr.
Albert B. Maggio, Jr.

Of Counsel at CRGO Law

Your reference to "inevitable disclosure" is spot on. This doctrine may apply even in the absence of a non-competition agreement. Courts have applied this doctrine where the former employee has knowledge of the employers trade secrets and the employee engages in direct competition with the former employer. Some courts have even interpreted "inevitable" to mean "likely."

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Profile Picture of Alden Knisbacher
Alden Knisbacher

Attorney at Knisbacher Law Offices

The law is complicated and fraught with problems. Non-competes, generally are not enforceable. Your employee could sue you for violating California law -- B&P Sec. 16600.
A Non-compete which really involves Protection of Trade Secrets is, PERHAPS, enforceable, if NARROWLY DRAWN.
Excellent article here:
http://www.non-competes.com/2011/08/californias-trade-secret-exception.html

Bottom line -- Be careful -- You should proceed with the advice of counsel

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Profile Picture of michael shimokaji
michael shimokaji

Partner at access ip group

Probably, but it would require a lawsuit.

Michael
www.accessipgroup.com

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Profile Picture of Glenn Lyon
Glenn Lyon

Partner at MacGregor Lyon, LLC, Business Attorneys

No, not unless you have an enforceable non-compete agreement with that former employee that precludes such employment. However, you would have a claim against the former employee and possibly the new employer if he discloses actual trade secrets regardless of the non-compete.

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