Will My Employer Sue If I Leave? Non-Compete Agreements and the Like

I'm not sure if it's just a coincidence, but lately I have had several consultations all of a sudden with pairs of individuals who were assessing leaving their current jobs either to start a new business in a related industry or move to a competitor or similar firm. They were smart to review their obligations and risks of legal action by their employers because of each of these clients had signed what is often referred to as a "non-compete" or a "non-competition agreement."

Technically, these kinds of contracts usually go by a variety of names, such as a "confidentiality and nonsolicitation agreement" or "proprietary information and inventions agreement" or some variation thereof. In fact, only a minority of proprietary agreements with employees actually say that competition is prohibited. Instead, the primary aims of such contracts is to (1) establish ownership of employee work product, (2) provide for no unauthorized disclosure or use of employer trade secrets or other confidential information, (3) prevent soliciting of established company clients for a similar new employer and (4) prohibit inducing other employees of the company from leaving. Often, such obligations will be effective for from six to 18 months from the last date of employment.

Now, as a practical matter, one or more of these types of obligations may well have the effect to limiting competition for some period of time. Generally, most states are reluctant to enforce an outright ban on employees joining a competitor in some capacity. After all, an individual generally should have an opportunity to make a living in the same industry that he or she has been working in. However, courts are very willing to allow a company to protect its intellectual property, including inventions and trade secrets, and customer relationships that it created substantially from scratch.

Accordingly, employees need to be careful and think through their potential risks and liabilities before they make a move. A complicating factor is that no-competes and other proprietary agreements tend to be very broadly worded and one-sided in favor of the employer. So, even the most innocuous new business or job arguably may inherently involve the use of IP developed in part at a previous employer or involve dealing with some of the same customers.

While every case has to be reviewed in light of the particular company, job, customers and non-disclosure agreement terms, here are a few basic questions to consider the likelihood of employer enforcement action:

  • Have you been working on developing secret new products, services or methods?

  • Did you have any work-related inventions?

  • Are you a very senior level employee?

  • Are any other employees going to the same place as you at about the same time?

  • Are you going to a competitor?

  • Will you be doing substantially the same function or work?

  • Will you be calling upon or working with any of the same customers or suppliers?

  • Does your new situation have the potential to result in lost business or opportunities for your employer?

  • Does the company have any history of suing departing employees?

The more your answers to the above questions were "no," then the less likely it would seem a lawsuit would be expected. As always, this blog entry is for general informational purposes only; consult with an attorney before making any decision regarding this subject.

Jeremy A. Gibson is an experienced intellectual property attorney and has drafted numerous proprietary agreements and handled a variety of non-compete and similar enforcement situations in Chicago, Illinois and surrounding areas. Our Illinois business lawyers are available to meet with you in offices around the region, including Chicago, Deerfield, Naperville, Northbrook, Oakbrook, Rosemont, Schaumburg and Skokie. Just contact us anytime.