When a valued employee goes to work for a competitor, going into damage-control mode is almost instinctive. You want to reassure your clients and remaining employees alike that the departure will have little effect on business as usual. But your most immediate concern is to be sure that your company is protected from the risk of the departing employee revealing confidential information or trade secrets to your competitor.
Noncompete agreements are designed to ease that concern. Enforcing such an agreement with an injunction, however, is not always as straightforward as you might think. Courts may look beyond the actual elements of the agreement to larger issues of equity.
Houston HR attorney Alan Bush cites Primary Health Physicians, PA v. Sarver as an example of an enforcement case that initially looked routine. A doctor had a two-year noncompete covering the 10-mile radius around the clinic where he worked. When the doctor took a job with another clinic within the 10-mile radius, the trial judge denied a temporary injunction and the Dallas Court of Appeals upheld the ruling. The court found that simply taking a job with a competitor, even within the agreed radius, wasn’t sufficient cause for an injunction. The employer needed to show “irreparable harm.” Since the doctor had not taken confidential information or patients from the ex-employer, the court saw no cause to issue an injunction.
If, however, an ex-employee does indeed solicit customers or reveal confidential information from a previous employer, Texas courts tend to side with the employer and issue an injunction. The problem, of course, is that you would rather not wait to see evidence of irreparable harm.
Fortunately, preemptive action can persuade some trial judges to issue an injunction before any real damage has been done. The key is in proving that irreparable harm is likely to occur, based on “inevitable disclosure.” The idea is that an employee that goes to work for a competitor is likely to use the ex-employer’s confidential information without necessarily intending to.
A case in point is TransPerfect Translations, Inc. v. Leslie. The ex-employee had not solicited any former clients or revealed any confidential information from the previous employer. But the court issued a preliminary injunction based on the opinion that Mr. Leslie was unlikely to be able to perform his new job without using proprietary knowledge gained from his old job.
The Preemptive Approach
The best time to take preemptive action is before the employee leaves, during the exit interview. Review the terms of the noncompete agreement and get a written acknowledgment of such from the departing employee. If the terms are later violated, your case for an injunction will be even stronger. You can also learn a lot from giving the ex-employee’s computer and smart phone to the IT team or an independent examiner to check for evidence that information has been copied.
Reviewing your noncompete agreements and policies for departing employees with your attorney at regular intervals can help preserve your confidential information — and stay out of court.