Without a noncompete agreement, can we stop a former employee from undercutting us? — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily
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Without a noncompete agreement, can we stop a former employee from undercutting us?

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in Employment Law,Human Resources

Q. We just had a successful salesperson quit his job and join one of our major competitors. We did not, unfortunately, have him sign either a noncompete agreement or a confidential information agreement. We are very concerned that he may have taken, and may be using, some of our company’s confidential business information, including detailed customer information. Is there anything we can do about this situation, given the absence of any written contract?

A. Yes. Employers may have some legal rights in this situation. Minnesota, like many other states, has a law that applies to all employees and prohibits them from taking trade-secret information, even if they never signed a written confidential information or nondisclosure agreement.

That same law would prohibit another company from using your trade secrets if it got the information from your former employee.

Key factors include whether the information truly was confidential (as opposed to being publicly available from other sources) and whether you took adequate actions to try to keep that information secure and confidential.

In addition, under Minnesota law, the concept of a fiduciary duty of loyalty also applies to all employees. That duty prohibits an employee from taking actual steps to compete with their employer (including, among other things, gathering confidential information for personal use and contacting customers) before they choose to end their employment.

In the end, however, if your business deals with impor­tant and confidential business information, you should start requiring employees who have access to that type of information sign a confidentiality agreement (and perhaps a noncompete agreement) as part of their acceptance of an employment offer.

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