Remember when the US employed “shawk and awe” to start the war against Iraq? Do the same type tactics work in non-compete cases? One issue that typically arises in non-compete enforcement actions is who to sue. Of course the lawsuit will name the former employee who is violating their post-employment covenant but what about the new employer?
There are a couple of things to consider here. First, the objective of the litigation. In some cases that may be for the former employee to quit working for the new employer. That is not always the case. Sometimes the objective may be to keep the former employee from contacting certain customers etc. How much the employer wants to “ratchet up” the litigation may be based on this.
What are the pros and cons of filing suit against the employer:
- Attorneys’ fees – Sometime the employer may agree to pay the employee’s legal fees – sometimes not. When a former employer sues both, it is much more likely the new employer will simply have its attorney represent the new employee as well. Make no mistake about it legal fees can drive a resolution. An employee who is on his/her own paying for their own fees may be far more likely to resolve a case as opposed to the employee who has the financial backing of their new employer.
- Driving the Wedge – Believe it or not some employees don’t tell their new boss about the non-compete they signed. Sometime the threat of a lawsuit against the new employer may lead to resolution. Let me give you an example – A few years ago we took presuit depositions (didn’t file a lawsuit but went through the procedures where we could depose witnesses) of the former employee and new employer. We sued the former employee and showed the evidence we had developed against the former employee to the new employer. This included an email where he told the new employer that he intended to targer the former employer’s customers – that’s pretty good evidence! The former employer folded and fired its new employee. It did not want to get involved in a lawsuit.
- Sometime the threat of a lawsuit is better leverage than the lawsuit. Once the employer is sued that’s it, it has lost the option to let the new employee go.
These are just a few things to consider. Many times a company looking to enforce a non-compete will opt for the “shawk and awe” approach – file a lawsuit seeking a termporary restraining order and get to the courthouse as quickly as possible. This may be the right approach depending on the circumstances. There is no one size fits all solution. In some instances a pre-suit dialogue will make sense to see exactly what is in play. In Dallas, a party seeking a TRO has to give the other side two hours notice. In most cases you have to talk to the other side. I see this as an opportunity to begin setting the framework and expectations for resolutions of the dispute.