You just found out that a key employee who just left your company is now working for a direct competitor and is most likely in violation of the non-compete agreement he signed when he first came to work for you. There is potential for trade secrets to be revealed or for that employee to seduce customers or additional employees away from you. What do you do?
Enforcement of non-compete agreements has been an issue of debate across the country, and some states don’t allow enforcement of such agreements except under specific circumstances. Fortunately, Ohio law and legal precedent generally support non-compete agreements so long as they are reasonable. (See our article on Using Non-Compete Agreements to Protect Business Interests to understand what makes a non-compete agreement reasonable) So Ohio employers should not hesitate to take action against a former employee who is in violation of a non-compete agreement.
Cease and desist order
Unless there is immediate concern regarding trade secrets or intellectual property, the first step is usually to have your company’s attorney serve the former employee and their new employer with a cease and desist order. This is a letter that informs the employee and their employer that the employee is in violation of a non-compete agreement and orders cessation of all activity that violates the agreement, including working for the new employer if appropriate.
In most cases, a cease and desist order will fix the problem. Many times an employee either forgot that he or she signed a non-compete agreement or they didn’t expect to get caught violating it. A cease and desist order both reminds them of the agreement (it should be accompanied by a copy of the agreement) and lets them know you are aware and prepared to take legal action to remedy the situation. In either case, the most common response is to stop violating the agreement. Sending a letter to the employer as well further ensures the situation won’t continue even if the employee decides to ignore it.
A cease and desist order can also buy you time to get more information on the situation if you suspect violation of a non-compete agreement but aren’t sure. The employee’s response will give you more information without needing to file a lawsuit right away.
Unfortunately, a cease and desist order doesn’t guarantee compliance. If the employee and/or employer believe the non-compete agreement is unenforceable or doesn’t apply to the situation, they are likely to respond with a letter from their attorney explaining their reasoning. If you disagree with their reasoning, filing a lawsuit against the employee and employer is the next formal step.
Filing a lawsuit
Besides being the next step after a cease and desist order fails, a lawsuit may be the appropriate first action if the information at stake is sensitive enough that you can’t wait to see whether the employee will comply with a cease and desist order. If a lawsuit is necessary, your lawyer should file a complaint along with request for an injunction in the appropriate court. An injunction is a court order requiring the employee to cease the activity that is disputed until the court can rule on the matter.
Lawsuits require a lot of time from attorneys and can get expensive very fast. Before filing a lawsuit over a non-compete agreement, an employer should review the matter with his or her attorney and determine whether the potential loss justifies the expense of a lawsuit and whether a judge is likely to enforce the agreement.
The best way to enforce non-compete agreements is to take some precautions before an issue ever arises. The first step to take is to ensure your agreement is enforceable under current Ohio laws. Non-compete agreements and other employment documents should be reviewed by an experienced Ohio business attorney every two to three years to ensure they meet the standards of current laws and legal precedents.
The second step is to make review of the non-compete agreement a part of your employee exit interview. Reminding parting employees of the agreement can do a lot to dissuade them from violating it. Finding out what the parting employee’s plans are for future employment should also be a part of the exit interview. If a parting employee tells you they plan to go to work for a competitor, you have an additional opportunity to remind them of the non-compete agreement, and you can notify the new employer of the agreement as well.
If you don’t already have non-compete agreements for key employees with access to sensitive information, it is essential that you have your attorney draft one and customize it to the particular positions to which it will apply. Other agreements, such as confidentiality agreements and agreements not to solicit clients, can also help protect intellectual property and trade secrets.
In Ohio, the business planning attorney’s office of Gudorf Law Group, LLC, can assist in drafting and reviewing non-compete agreements and other employment-related contracts and agreements to ensure your business interests are protected. Call our office at 1-877-483-6730 to schedule a free consultation.