Legal

Litigation over non-competes on the rise

Legal and HR experts are seeing an increase in the number of noncompete lawsuits filed by companies.

Legal and HR experts are seeing an increase in the number of noncompete lawsuits filed by companies.

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In the present touch economic environment, it seems that more and more companies are taking precautions to protect their business. According to workforce.com:

As many executives are taking extra measures to protect their companies during the economic downturn, employment attorneys are seeing an increase in litigation around trade secrets. Specifically, employers are being more aggressive about suing former employees regarding noncompete agreements, attorneys say.

In the past, the majority of litigation around noncompetes has involved key executives or salespeople at the firms. But now, [experts are] seeing more litigation involving junior and midlevel employees. Even in these tough economic times, top-performing employees can be offered positions elsewhere, and companies want to be prepared for that.

This could become a very dicey situation in light of the increasing numbers of employee layoffs. Some people could not only lose their jobs but consequently be kept from accepting new positions.

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Toni Bowers is Managing Editor of TechRepublic and is the award-winning blogger of the Career Management blog. She has edited newsletters, books, and web sites pertaining to software, IT career, and IT management issues.

6 comments
jdclyde
jdclyde

It should be similar to people that get training. If the employee leaves the company, they have to pay back for the training, or follow the non-compete. If they are let go, all bets are off, and I don't see the courts holding up a non-compete if the person is let go.

vhaakon
vhaakon

Most states limit the use of non-compete contracts. This time is a great moment for workers to revolt by calling their state and federal representives to outlaw this practice that limits of denies employment. Being let go does not in some states invalidate the non-compete clause. It is in the best interest of goverment to overthrough these clauses California does!

peter.weir
peter.weir

The responses so far are about protecting a worker and putting the company at huge risk. Why exactly should a company invest time and money into a person, introduce them to their clients, involve them in their work, etc if that person can then just turn around and undercut the company with the client? Remember the person is being paid all this time as well - they aren't "doing the company a favour". Also with respect to any such clause being invalidated if the employee is let go??? So if you want to screw over your employer all you need to do to make it legal is do something bad enough to get yourself fired? That doesn't make any sense.

jck
jck

I was held to a "non-compete" whether I was terminated or quit. Depending on the state, they may or may not hold it up. And by the time you get through court, the period is up and you don't have to wait anymore. I had to wait 6 months before I could go do any work where I had worked as a contractor. That's what sucked. Cause, I could have been working for a huge corporation right now if I hadn't agreed to that thing. But, you do what you have to so that ya can pay the bills..

RFink
RFink

Simple solution, don't lay off your employees and they won't compete against you. Stealing trade secrets is another story, everyone has the right to earn a living.

speculatrix
speculatrix

in Europe, the restraint of trade and human rights basically makes non-compete clauses in contracts void. that said, there was a case where a senior banker who was personal banker to some of the richest people in the UK left to another bank and took his customers with him. it was upheld because his new employer explicitly took him on in order to steal those customers. in general for a non-compete clause to work, the soon-to-be-former employer will have to keep the employee on full pay for the duration of the non-compete period. the non-compete clause also needs to be a completely separate document/contract from the employment contract, otherwise it's hard to keep that clause in force when the rest of the contract has ceased. disclaimer: I am not a lawyer, and I am not *your* lawyer, you did not pay for this advice and it comes with no warranty.

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