Non-Compete Enforcement Tips
February 20, 2009
I liked Jay Shepherds’ remarks in Eight Ways to Lose a Non-Compete Case blog entry. Here they are with my thoughts in italics:
- Putting too much faith in the belief that the court will enforce the language of the non-compete agreement as written.
- Trying to enforce a non-compete against employees who really don’t possess any confidential information or customer relationships. Does the employee really have trade secrets?
- Drafting the non-compete too broadly.
- Focusing only on geography, duration, and scope of the non-compete rather than on the existence of protectable interests.
- Waiting too long to file.
- Asking for an injunction before you’ve developed enough evidence. Texas permits TROs and a party can secure limited discovery for the injunction hearing.
- Filing in the wrong jurisdiction. If you want to enforce a non-compete file in the jurisdiction where the former employee is based or working.
- Focusing on the law instead of on the story of the case.
I agree with most of the eight but here is what I would add:
- Know the law from state to state, the enforceability of a non-compete in Texas is quite different from California;
- Make sure the state law you want will control. Along the same lines, if your non-compete specifies Texas law and the employee is in California, make sure the choice-of-law provision will stick;
- Don’t wait to file. Sometimes you may have to file a lawsuit and seek an injunction before you have all the evidence – but filing early can protect your business and possibly make your former employee think twice about violating the non-compete.
- Contact your clients. Just because your company’s contact person with the client has departed doesn’t mean the business will go. Call your clients and be up front with what has occurred and how valuable their business is to your company.
- Marshall your evidence. Odds are your departing employee began preparing to compete before they left your company. See if they left a papertrail. (email, phone calls, accessing company databases, and printing out company information)
- Remember your targets. Not only the employee who left, but the company they left for or formed.