An employer must act quickly when it suspects that an employee or former employee is violating a non-competition clause or contract. It is critical to confirm that there is sufficient factual and legal support before initiating legal action. Filing a lawsuit for monetary damages or a request for injunctive relief can backfire if an employer is not prepared with sufficient evidence to support its claim.
Employers often learn from clients, customers or other employees that an employee or former employee is working for a competitor or preparing to do so. Rather than rely upon second-hand information of a suspected violation of a non-compete, employers should promptly conduct their own investigation. Any investigation into a possible violation of a non-compete should include ensuring relevant documents are gathered, searching through and preserving electronic evidence, and conducting interviews of witnesses. Quick action when an employer suspects an employee of violating a non-compete demonstrates the employer has a legitimate business interest to preserve and that it takes any suspected violation seriously. Quick action may also minimize the damage to the employer's business.
Employees often sign several documents both before and during their employment. Such documents might include: employment applications, offer letters, employment contracts, stock option agreements, and confidentiality agreements. Some of these documents may reference, incorporate or even supersede obligations contained in other agreements. Accordingly, when there is a suspected violation of a non-compete, employers must be sure to locate all agreements signed by the employee that contain or affect post-employment restrictions, including non-competition, non-solicitation and confidentiality provisions that may prohibit an employee from serving his former employer's clients or customers, or soliciting former co-workers to work for his new employer. The best practice is to retain all agreements that an employee has signed, even those that are no longer in effect because they may still be useful in the litigation.
Employers suspecting that an employee violated a non-compete can often obtain valuable evidence from the employee's computer. Of particular importance is evidence showing which electronic files a departing employee accessed, transferred or deleted. This type of evidence can be very incriminating. Because confidential, proprietary and trade secret information is often stored in electronic form, departing employees may attempt to transfer information by e-mail to a personal e-mail account or portable storage device. Employers that suspect a departing employee is violating a non-compete should immediately shut off the employee's access to the employer's computer system and preserve the employee's e-mail account, computer hard-drive, and any other additional electronic devices, for example, an employee's company cell phone. An employer should also review any security footage of the building and records of any print-outs for suspicious activity, such as accessing the building at late hours or printing out large volumes of data. An employer should also consider hiring an information technology specialist to make a forensic image of the employee's hard drive and other electronic devices.
Employers investigating suspected non-compete violations should include interviews of co-workers and clients or customers. Co-workers may have witnessed conduct by the departing employee that violated the non-compete. And clients or customers may be able confirm a suspected violation. To the extent any co-worker, client or customer has first-hand knowledge that an employee has violated a non-compete, employers should consider obtaining affidavits from these witnesses. Affidavits can help bolster an employer's application for injunctive relief as well as lock down a witness's version of events while they are still fresh in their memory.
Employers seeking to enforce a non-compete through legal action have several options available. Before pursuing a course of action, employers should consult with the lawyers of Friedman & Feiger, LLP to strategize the response. Ryan Lurich may be reached at (972) 450-7305.