Our country's slumping economy has only increased the pace and intensity of what have become known as "poaching" lawsuits.
These cases come in several different flavors. Many employers attempt to tie up departing key employees with written noncompetition agreements, restricting the ability of the employee to compete after departure. In most states (except California), these agreements are enforceable if reasonable in geographic (where), temporal (how long) and customer (which customers) restraint.
However, noncompetes are disfavored by courts because they restrain competition and inhibit the free movement of individuals from job to job. Often, these agreements are not enforced for a variety of technical and policy reasons.
Other cases proceed on trade-secret theft claims. Departing employees often take with them-- intentionally or unintentionally--critical confidential information that would be useful to a competitor. Even in the absence of a noncompete agreement, remedies for these situations frequently include injunctions against the new employer from employing the individual in question.
Many states have recently adopted the Uniform Trade Secrets Act, which standardizes the definition of trade secrets and provides remedies for trade-secret theft.
Still, other cases involve the hiring away of substantial numbers of competitor's employees, prompting claims of illegal "raiding" or "piracy." This is viewed in many states as a form of unfair competition, even if there are no noncompetes involved and no theft of trade secrets.
Case in point: In recent weeks, IBM sued a former executive who went to Apple to run its iPod and iPlane business, despite the existence of a written noncompete. Motorola has sued Blackberry maker Research in Motion for taking dozens of its employees. Other high-profile suits filed involving allegations of trade-secret theft have come along. Why the sudden splurge of suits?
The worsening economy has resulted in additional pressures that are causing this sudden increase in poaching litigation. Employers are cutting costs and expenses to the bone, producing less nurturing work conditions, leading to departures.
Faced with "brain drain," employers step up the pace of recruiting from their competitors as a quick fix. Anxious to please recruiting employers, employees expressly or implicitly promise to deliver valuable competitive information.
And employers, anxious to protect themselves, have an increased motivation and bravado to initiate and to resist litigation. They dig in to protect their pool of employee talent and proprietary information. Oftentimes, companies sue to make an example of a departed employee so that employees left behind will think twice about leaving.
So, what can you do? With business poaching climbing, take proactive steps to protect your company, its reputation and bottom line. Look out for suspicious activity and red flags for a breach. This includes unusual meetings between employees and customers, atypical requests to access sensitive information, e-mail and data system access at late hours, and so on.
Be vigilant when an employee leaves. Conduct exit interviews reminding employees of their nondisclosure and noncompete duties; gather all company information, guides and manuals; question employees about use of personal laptops for business use; and, if necessary, work with a forensic expert to examine company-issued cell phones, laptops, desktops and PDAs.
Finally, make sure you're not hiring a lawsuit-waiting-to-happen. When you recruit from your competitors, vet the recruited employee for noncompete agreements, theft of proprietary information and illegal soliciting of other employees.
It's getting ugly out there, but you can minimize your fallout.
PHILIP G. KIRCHER is co-chairman of the commercial litigation department at the law firm of Cozen O'Connor.
January 8, 2009
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