Crain’s Detroit, by Dustin Walsh, reported last week that this year marks the 30 year anniversary of arguably the most significant Michigan court opinion concerning non-compete agreements. See “30 Years Later, A Noncompete Ruling has Been Forged into Law.” The case referenced in this article comes from a January 17, 1985 Michigan
Is Your Non-Compete Agreement Enforceable? Depends on What Law Applies.
A recent Delaware court case invalidating an employer’s non-compete agreement provides a cautionary reminder for companies with operations and employees in multiple states.
Specifically, in Ascension Ins. Holdings, LLC v. Underwood (Delaware, Jan. 28, 2015) the company, Ascension was incorporated in Delaware, but headquartered in California. California was also where the employee, Roberts Underwood worked.
An Uber Example of Getting Caught with Your Hand In Your Employer’s Cookie Jar
Uber and Lyft are both internet and mobile application based technology companies offering a peer-to-peer ridesharing platform. Or for less tech-speak, they are involved in what is generally described as the “sharing economy.” However, a recent lawsuit makes clear that sharing has its limits.
Specifically, Lyft is suing a former executive (Lyft v Uber (PDF)), Travis VanderZanden, for breaching his confidentiality agreement and fiduciary duty and after he jumped ship to join Lyft’s chief rival, Uber. According to the complaint filed in the lawsuit, the former executive copied vast amounts of confidential information on his way out the door. Uber has denied that Mr. VanderZanden has “shared” any of this information with Uber.
These claims and allegations are by no means extraordinary. But they do provide a perfect roadmap for both employers and employees to follow when it comes ending one employment relationship in order to join a competitor. But instead of taking an all-out road trip to address all of those issues, two points stand-out.
How to Get Guarantee Your Former Employer Will Sue You
As to the firs issue, a little background for what not to do if you are an employee about to join a competitor: Lyft’s lawsuit alleges that VanderZanden informed the company’s founders of his plans to resign on August 12 and agreed to meet with the founders on August 15. But VanderZanden cancelled that meeting and suggested they speak after the weekend.
According to the complaint, it was a busy weekend for Mr. VanderZanden. Lyft alleges that he backed up a number of emails and confidential documents to his personal home computer and mobile phone before handing his company computer back. These actions were discovered after Lyft conducted a forensics analysis of VanderZanden’s company-issued laptop. The analysis further revealed that months prior to the departure, Mr. VanderZanden synchronized his personal Dropbox account with his Lyft laptop, copying a “significant number of Lyft’s most sensitive documents” in the process.
So the first issue for both employers and employees is really two sides of the same coin. From an employee’s perspective, assume your digital fingerprints will point to every piece of digital information you touched, e.g., every file, every email, every document, etc. And if those fingerprints suggest you took you former employer’s information to your new employer, be prepared to be sued.
And because these digital fingerprints provide valuable insight, employers need to have a plan in place to preserve this likely treasure trove of digital evidence. This is because the absence of such evidence may eliminate an expensive Don Quixote-like endeavor against the former employee. There is nothing worse than spending A+ resources on a C- employee or situation.
Conversely, the presence of such evidence will be needed to convince a judge that injunctive relief is appropriate and to otherwise support claims against the former employee. As part of your company’s plan, you’ll need to address how to preserve, analyze, and use the digital evidence.
Play a Strong Hand; Bluffing in Litigation Can Be Costly
Continue Reading An Uber Example of Getting Caught with Your Hand In Your Employer’s Cookie Jar
Michigan Court Cuts Down Non-Compete Agreement
Abraham Lincoln once noted that if he had six hours to chop down a tree, he would spend the first four sharpening the axe. For employers, that sort of up-front attention to details is especially important when it comes to non-compete agreements. Otherwise, as a recent Michigan Court of Appeals illustrates, the only thing likely
Common Mistakes that Derail Enforcement of a Noncompete Agreement
Our law firm was recently hired to represent clients – former employees – being sued for allegedly violating a noncompete agreement, trade secret misappropriation, and other business related claims.
As is typical with these sorts of cases, the Plaintiff, the former employer, was seeking injunctive relief in the form of a temporary restraining order (TRO)
Is Your Non-compete Agreement Enforceable? Not Without a “Reasonable Competitive Interest”
“Sticking feathers up your butt, does not make you a chicken.“
Tyler Durden, Fight Club
Under Michigan law, one required element for having an enforceable non-compete agreement is a “reasonable competitive business interest.” But, like the chicken quote, business owners can’t expect to just stick the phrase “reasonable competitive business interest” into an
What Steps Can Your Business Take to Avoid Becoming a Victim of Trade Secret Theft?
Trade secret theft continues to be a major concern (or it should be) for businesses. And the numbers back up this conclusion; In an article by by Will Yakowicz, appearing in Inc., “How to Avoid Becoming a Victim of Trade Secret Theft,” it’s noted that:
Criminal theft of corporate trade secrets is reaching epidemic levels, experts say … the number of trade secret cases in U.S. federal courts doubled between 1988 and 1995, doubled again from 1995 to 2004, and is projected to double again by 2017.
Mr. Yakowicz’s article goes on to provide business owners with great advice on how to reduce trade secret thefts in your business. Having recently wrapped a trade secret misappropriation trial filed in Michigan state court, I can definitely say that the article is worth reading and the recommendations should be meaningfully considered by any business with information worth protecting.
What happens when a trade secret misappropriation lawsuit falls apart.
For background purposes, I represented a company and its executives who were sued for claims involving trade secret misappropriation, breach of a non-compete agreement, and other business related claims. One problem with any sort of lawsuit is that often times the facts get in the way.
This became clear as two days after the trial began, the lawsuit settled on terms very favorable to my clients (Plaintiff had requested over $860,000 at Michigan’s case evaluation procedure, which resulted in the evaluation panel awarding $175,000 against my clients). However, the parties settled the lawsuit for $8,500.00 payable over time.
Continue Reading What Steps Can Your Business Take to Avoid Becoming a Victim of Trade Secret Theft?
Requiring a Current Employee to Sign a Non-compete Agreement: Will it be Enforceable?
Under Michigan law, requiring current employees to sign a non-compete agreement presents unique issues for employers when it comes to having an enforceable agreement.
Continue Reading Requiring a Current Employee to Sign a Non-compete Agreement: Will it be Enforceable?
Enforcing Noncompete Agreements – What Law Will Apply?
Enforcing noncompete agreements will depend upon state law. What law applies will be critical for determining if a noncompete agreement is enforceable.
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The Challenge of Balancing Noncompete Agreements with Business Growth
In a previous post (Noncompete Agreements – A Hurdle to Employment and Innovation?), we discussed research that suggested noncompete agreements hinder innovation.
Expanding on why innovation is hindered, in any context in which a noncompete agreement is entered into e.g., an employment relationship, a founder whose start-up is being acquired, or an owner selling his