Compliance Strategies for Non-Competes

Dan M. Forman, Los Angeles Office Managing Partner & Chair of CDF's Unfair Competition & Trade Secret Practice Group, recently authored the article "Compliance Strategies for Non-Competes" for Today's General Counsel Fall 2020 issue.

Excerpt:  

"Non-Compete agreements are an important tool to protect a company from unfair competition from an employee or an executive who decides to take what she has learned about a company’s business, its trade secrets, clients, vendors or employees and use that information for the benefit of a competitor, or, to start a competing business. 

Most states employ a version of the Uniform Trade Secrets Act and the United States enacted the Defend Trade Secrets Act to prosecute civil claims against trade secret theft by former employees.  These laws provide for damages and include a powerful injunction remedy against a competitor or former employee who steals a trade secret.  And, these laws provide for double damages and the recovery of attorneys’ fees in certain conditions, if the laws are violated.  However, proving such claims, beginning with the question as to whether the employer had a “trade secret” can be very difficult.

Enforcement of a non-compete agreement presents a lower burden of proof than fighting over trade secret theft as the only facts that must be established are whether an enforceable non-compete exists and whether the former employee is competing or working for a competitor.

Historically, non-competes were enforced if they complied with a test of reasonableness; namely whether the non-compete was limited to protect a legitimate protectable interest of the employer, for a reasonable duration of time, and over a reasonable geographic area. 

Like any good tool, such agreements must be maintained, honed, and cared for to ensure that they will be enforceable when, and if, an ex-employee joins forces with a competitor, especially as the law in this has changed significantly in many states in recent time.  Pay close attention to the following five compliance strategies to maintain enforceable and effective non-compete agreements."

Click here to continue reading the article.

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