You suspect a former employee of violating a non-compete agreement they agreed to when employed at your company. What do you do?
Review All Relevant Documentation
It is critical that the employer locate all non-compete agreements the former employee signed. Some may be stand-alone documents while others may be fine print within other documents such as stock options or offer letters.
Interview Potential Witnesses
Current employees who worked with the former employee may have information about their post-employment activities. Speaking with clients may be the next step, especially in cases where the former employee may have solicited business from them.
Preserve Evidence
If the evidence points towards the former employee violating an agreement, it is critical to preserve possible internal evidence. Any stored emails by the former employee and security footage of that person’s movements within the company prior to termination should be preserved. If possible, any computer equipment they used should be retained for evidence. If that is not possible, any backups taken of their computer will be relevant.
Is The Agreement Enforceable?
While Texas courts have made enforcing non-compete clauses easier, there are still clear provisions the employer must meet for the agreements to be enforceable.
- The employee must have adequate consideration when signing the non-compete agreement. Consideration is something of value to the company like stock options, confidential information, trade secrets, or special training that gives the employer an advantage.
- The agreement must have specific terms as far as time, geography, and scope to be enforceable. The agreement must be specific and targeted at protecting the company’s business interests.
Taking Action
There are three possible courses of action:
- Send the former employee a cease and desist letter. The letter reminds the employee of the contractual obligations and tells them to cease their current activities. The letter may request that person to give assurance they will comply going forward.
- Contact the former employee’s current employer. If the cease and desist letter does not work, contacting the new employer may be the next step. Sometimes a new employer may not know of the non-compete agreements.
- File suit against the former employee and, in some cases, the new employer. In some cases, this is the last step taken when the other two do not work. In other cases, the violation of the agreement is egregious and requires immediate legal action. After filing suit, the company can seek an immediate injunction to stop the former employee’s violations of the agreement until the case can go to arbitration or court.
Will You Have to Go to Arbitration Court?
Some non-compete agreements require the parties go to arbitration instead of through the courts. No matter which option is used, the process is fairly similar. The arbitrator or judge hears testimony and receives evidence from both sides. After going through the hearing process, the arbitrator or judge brings down a decision on whether the former employee violated the non-compete clause. If the decision goes against the former employee, a permanent injunction will be put in place. Also, the provisions of the non-compete clause go into effect.
If you think you have a former employee violating a non-compete agreement, you need to have legal counsel review the situation before you take action. Contact our business attorneys at Stockard, Johnston, Brown, Netardus & Doyle, P.C. in Amarillo, Texas.