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Noncompete agreements protect against the competitor working in your midst

by on
in Employment Law,Human Resources

Texas law says that employees owe a duty of loyalty to their employers, but can still plan to enter into competition with that employer while still employed. That, according to the courts, helps encourage competition.

On the other hand, it also means that employees may be looking for ways to poach your best ideas—and other employees—for their own gain.

That’s why it’s important to protect your trade secrets and business plans by developing a clear, comprehensive and binding noncompete agreement for employees to sign—one that prohibits the poaching of staff and clients and enforces confidentiality. Then, if the worst happens, at least you will have a legal remedy.

Recent case: John Wilkinson and Sharon Taulman worked for Navigant, a national consulting company. They managed the claims administration segment of the business. Both signed confidentiality agreements.

Sometime during their tenure, they apparently got the notion that it would be a good idea to “sell” the operation to a competitor, so they set up their own corporation. They solicited interested competitors and gave those companies detailed breakdowns of Navigant’s business. The plan was that a potential buyer would pay their newly formed company to run the claims administration business using Navigant employees.

Of course, Navigant wasn’t theirs to sell, and they merely planned to solicit current employees to come over to their new company and take the clients with them.

When Navigant got wind of what was going on (another employee tipped off headquarters), the company fired Wilkinson and Taulman.

The two then started a competing business, taking with them many Navigant employees.

Navigant sued and won almost $2 million each from Wilkinson and Taulman, based on breach of contract, stealing trade secrets and breach of fiduciary duty. Without the confidentiality agreements both Wilkinson and Taulman had signed, it would have been much harder for Navigant to win this case. (Navigant Consulting v. Wilkinson and Taulman, No. 06-11071, 5th Cir., 2007)

Advice: Because the law is complex, always have an attorney draft noncompete agreements and guide you through the signature process.

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