Friday, April 11, 2014

Judicially Imposed Non-Competes


Yes, you read that right.

Judges impose non-competes on people who never bargained for one. Usually, it's to punish a defendant for bad behavior.

Consider the client who - in the middle of the night and after his employment terminated - used the key he forgot to give back when he left earlier that day to enter his now-former employer's office and download customer information onto his laptop.

* facepalm *

This client had no non-compete agreement and no non-solicitation agreement. He was free to call anyone he wanted and solicit their business. But one foolish mistake changed all of that: the judge ordered my client not only to return all of the plaintiff's information, but also to stay away from every client whose information he had downloaded for a WHOLE YEAR. Never mind that there were 450 or so customers - too many for my client to possibly remember - he was ordered to STAY AWAY. And you better believe the plaintiff watched him like a hawk in the hopes of busting him for violating the injunction. (Thank goodness the client was a good boy and followed the injunction to the letter).

Can judges do this? Well, they're not really supposed to.  Courts have almost universally stated that, in the absence of a non-compete, there's generally nothing wrong with contacting and continuing relationships with customers a departing employee knew through his former employer.

But these types of cases almost always come before a court on a motion for preliminary injunction. Such proceedings give courts the freedom to exercise their equitable powers, and that they do. Concepts like unclean hands, estoppel, and "you did a bad thing" come into play.

It was the latter concept that His Honor used in the above-referenced case.

It wasn't the first or the last case I had involving this kind of problem. It comes up more frequently than you would think. And so for you, dear friends, are three rules that you should WRITE DOWN NOW and REMEMBER the next time you are thinking about jumping ship.

Rule #1: If you have a non-compete and circumstances are such that you need the ability to compete, go see a lawyer. Don't stop. Don't pass go. Don't collect $200. Spend $200on a lawyer. Do it before you do anything else.  This is not self-promotion.  This is for your own good.  I promise you.   

Rule #2: If you don't have a non-compete and you have a good enough idea of who your customers are that you could figure out how to contact them after you leave your employer without the assistance of a customer list (even if doing so is a pain), then for the love of all that is holy, do NOT take the customer list with you!  Take no information of any kind belonging to your employer. None – not even the sticky note on your desk with your latest phone message. Trust me on this. 

Rule #3: If you have a choice in the matter, don’t resign abruptly.  It’s kind of rude.  But more than that, it just causes a cloud of suspicion to settle over you.  Put on your big boy or girl pants, go talk to your boss, and give two weeks’ notice.  Offer to clean up projects you will be leaving behind and go to your going away party.  This is just good business.  Don’t burn bridges. 

NOTE:  I compiled the information for this post from many different cases that I’ve worked on in the past.  If you are one of my clients and you are reading this, first – holla for reading!  But if you are thinking “OMG, this woman is judging me,” I assure you, I am not.  Rather, I am paying it forward on your behalf – enabling others to learn from your mistakes.  Everyone makes mistakes, especially when they act without consulting an attorney.  It’s really not the end of the world.  I promise you!   Be grateful for the pearls of wisdom that I am able to grace others with, thanks to you.   

Liza Favaro

Non-Compete Counsel
 
* Disclaimer: The ideas and opinions shared on this site are my own and are not attributable to my employer. No amount of interaction on this site will create an attorney-client relationship. If you have a legal question and you ask it here, I will also answer it here (if I can), but such answers do not guarantee results and do not create an attorney-client relationship. If you wish to contact me directly, you may do so at efavaro@gmhlaw.com.

2 comments:

Bob Small said...

Judicially imposed protective covenants are granted in another area (i.e other than where the employee has engaged in the wrong doing of which you speak.) Where a departed employee possesses trade secrets of a former employer that, as a practical matter, the employee could not help but use in performing his duties for his new employer, courts will enjoin that employment on a theory of unfair competition. For example, if the departed employee knows of all the blind alleys his or her former employer went down before developing a new product and the employee is hired by the new employer to develop a competing product, courts will enjoin that employment. See e.g. Air Products v. Johnson. Pa Superior Court

liza favaro said...

Good point, Bob!