NONCOMPETE & NONSOLICITATION AGREEMENTS
 

(Page Two)

 

TIDBITS, POINTS & OBSERVATIONS


Noncompete wars are emotionally vicious, often akin to a messy divorce.  Absent legitimate reason for going after an ex-employee, many negative traits come into play when an employer sues an employee.  In case you missed them on the previous page, here they are again: inflated ego, taking things personal, lack of vision/ethics/morals, greed, illegal ulterior motive, hatred, jealousy, envy, corruption, or stupidity.  All these may contribute to fueling noncompete battles.

 

 Noncompete agreements are a contentious area of employment and business law.  Battles between employers, businesses, and ex-employees typically turn into EMOTIONAL SLUGFESTS that often require the courts to break up the fight and determine the legitimacy and enforceability of the agreements.
Part of the problem is that California is one of the few states that generally declares as VOID any agreement that restricts an employee's right to work [about 44 states allow varying degrees of employer/employee noncompete agreements].  To out-of-state companies or "foreigners," California's noncompete prohibition law is whacky.
BONUS AND EXTREMELY RANDOM TIDBITS:
Typically, an employer seeks to enforce noncompete agreements so to prevent ex-employees, former business partners, or sellers of a business from going to work for a competitor, stealing the company's prospective or existing clients, customers or employees, or to stop these people from establishing or operating a business in direct or indirect competition against them.    
At times, an employer is justified in going after the ex-employee.  How so?  Well one example is when the ex-employee has stolen information from the ex-employer and is illegally using such to compete against the former employer or to use at his or her new job [for example, stealing a customer list.]  
A company may be correct in going after someone who sold all his her stock or control in a business, but who nevertheless is trying to get around a noncompete agreement that was part of the sale.
More often than not, a company has the means to hire lawyers, file a lawsuit and expend significant sums of money to attempt enforcement of "noncompete" agreements. 
  The bigger the company, the more money it can and will spend to win non-compete wars. 
In most cases, within the first 30 to 45 days of an intense dispute, the following may take place: 
1) The ex-employer or competitor will attempt to obtain a temporary restraining order [TRO];  
2) They will file a civil complaint or lawsuit for injunctive relief and alleged damages; and  
3) They may follow-up all this with writ proceedings should they lose at the trial court level.  Writ battles take place in the Court of Appeals.   
  Typically, an ex-employee simply wants a noncompete agreement declared illegal and unenforceable on the basis that such agreements violate California law and the State's public policy recognizing that all persons within California have a right to work where he or she wants, and any agreement that diminishes this right is void and unenforceable. 
  Unfortunately, in law and litigation, there does not exist a mechanism where a plaintiff or defendant can receive an immediate and expedited ruling on the merits of a lawsuit.  In other words, you can't just march into court, proclaim your innocence and right to work and have the judge "automatically" believe your version of events, no matter how right you may be.
Companies are often willing to pay HUGE sums of money for the above "preliminary" noncompete battles, REGARDLESS OF THE ULTIMATE MERITS OF A DISPUTE.   
This is because obtaining a TRO or preliminary injunction can effectively put the employee or competing company "out of business."  In other words, getting a restraining order or preliminary injunction can "take out the competition" even if the Company knows the "underlying" case is "thin" and that it will ultimately lose the case.    

 

"The Company" knows that most ex-employees do not have much money to fight noncompete wars.

 

  
  Typically, the employee does not have the means to finance a protracted legal battle over the validity of a noncompete agreement.
  In extremely rare cases, an employee's new employer may pay the legal fees and costs incurred in noncompete wars [often the new employer will be sued by the former employer or business attempting to enforce a noncompete agreement].
The status of California "noncompete law" in the employment setting  is always changing.   While many California courts have interpreted the "noncompete statute" to prohibit agreements that limit an ex-employee's right to work, employers continue to seek "friendly-to-business" California, federal, and out-of-state courts to obtain favorable interpretation and exceptions to California's noncompete statute. 





 
  Major flaws in the Section 16600 "right to work, non-compete" law is that the statute does NOT provide for remedies or sanctions for violations, nor for the employee to recover attorneys' fees and costs expended to fight against a company's illegal use of noncompete agreements.
  Issues related to the validity and enforcement of California noncompete agreements are complex. Regardless, here are some "buzzwords," phrases and topics:
  Enforceability of California noncompete agreements;
  Enforceability of other state noncompete agreements against employees who have moved to California to work;

RACE TO THE COURTHOUSE
(A recognized noncompete battle maneuver)
Trade secret misappropriation and how laws related to such interrelate with the law on noncompetes and fair competition;
 
  Foreign states, [meaning states other than California], enforcing their noncompete laws against California employees and employers;
  Forcing California employees to sign noncompete agreements;
  Being the "first to file" or the "race to the courthouse" for strategic advantage;
  Inevitable disclosure [of trade secrets] doctrine - Despite appeal court rejection of the theory, employers continue to attempt use this theory as a way to get around Section 16600 [purported trade secret concerns];
  Choice of law or venue to obtain strategic advantage.
  Federal vs. State Court jurisdiction and the perception that Federal Courts are more inclined to "enforce" California noncompete agreements.
Are you an employee considering leaving the company, or an ex-employee who has resigned or been fired?   
While working in another state did you sign any document that "kind of looks like" or definitely is a noncompete type agreement?  
When you left the company did you take ANY company information or property, equipment or data?  Are you intending to use, or have you used, the information you took from the company?  [warning: if you did this, you may have committed a crime].  
Did you take company information or equipment as "hostage" so to get paid owed wages, bonuses or commissions, or because you think taking the material helps your case or situation? [if you did, return it all immediately as the law does NOT permit you to do any this].

Did your employer have you sign any form of an employment, noncompete, nonsolicitation and/or nondisclosure agreement?  Were you forced to sign it?  Were you fired for not signing the agreement, or for protesting about it?
Does your employer appear "headquartered" out-of-state, or have you signed any company document indicating the law of a state other than California applies to interpretation or enforcement of the document you signed?  
Did you sell your business or interest in a company [e.g., stock] and execute a noncompete agreement as part of the transaction?  
Has the company or its lawyers threatened you with legal action for violating a noncompete or other purported agreement?  Have you received a letter accusing you of stealing company property, trade secrets or confidential information?  Were you served with a lawsuit?  
If your answer is YES to any of these questions, you should IMMEDIATELY seek the advice of competent counsel experienced in noncompete, trade secret and confidential information battles.  Bonus Tip: The lawyer should have significant experience in federal courts.   
Even if you have not yet been threatened by the company or its "muscle," IMMEDIATELY talk to a lawyer so to determine your rights or possible solutions to your predicament. 

 
 

If you do NOT seek the advice of an attorney BEFORE A DISPUTE DEVELOPS, such could expose you to SIGNIFICANT LIABILITY and/or LEGAL EXPENSE to defend against an employer's efforts to 1) enforce a noncompete or other employment agreement; 2) stop you from working; 3) put you out of business; and 4) have you arrested and thrown in prison.
  Do NOT put your head in the sand.  Stop deluding yourself into thinking that your former employer will not find out that you are working for a competitor [it will].  Do NOT gamble that you will not get caught [you will]. 
Despite the gloom and doom tone of all this, keep in mind that noncompete battles are extremely fact specific.  This means that you should NOT assume that you have no recourse and that all is lost.   
Talk to a lawyer before making any assumptions about your particular circumstance.  In many respects, the law does NOT permit game playing in this area of the law.  If you are honest, truthful and acting in good faith, the law will generally be on your side.   

 

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