Beyond the noncompete

Although, with the exception of invention assignment agreements, these agreements are generally reviewed under the same analytical framework as noncompete agreements (i.e., they must be reasonable in scope, geographic reach and duration, and they may restrict the employee's conduct only as far as necessary to protect the employer's legitimate business interests), courts are nevertheless more likely to enforce these agreements than noncompete agreements. For example, garden leave clauses are more likely to be enforced because of the palliative effects of the compensation paid during the restrictive period. Similarly, forfeiture-for-competition and compensation-for-competition agreements are more likely to be enforced because they impose only financial disincentives -- not a bar -- to an employee's employment by a competitor.

While the remaining agreements may impose significant restrictions on the employee's post-employment conduct, they do not impose direct restrictions on potential job opportunities, and therefore have an even greater likelihood of being enforced. That said, if the employee's primary value to a potential employer is his relationship with the employer's customers, he may find that a nonsolicitation agreement will have precisely the same practical effect on his job search as a noncompete would.

With or without these agreements in place, employees may also be bound by restrictions imposed by law. Chief among these are: 1) the duty of loyalty; and 2) the obligation not to misappropriate trade secrets or confidential information. These obligations prohibit employees from engaging in certain conduct harmful to their employers. In particular, an employee can take no steps to take his employer's customers, employees, trade secrets or confidential information. Employees who do so may find themselves liable for monetary damages and subject to a court order (called an "injunction") preventing them from using any of their ill-gotten gains, including not doing business with the customers post-employment.

Moreover, if an employee goes to work for a competitor in a position through which he will inevitably use and disclose his prior employer's trade secrets and confidential information, he may be required to leave the job under the so-called inevitable disclosure doctrine. Although the doctrine is not recognized in many states and rarely used even in the states that do recognize it, it is a powerful weapon that effectively provides the employer with an "implied" noncompete agreement.

Similarly, there has been some indication that a claim may exist under the Computer Fraud and Abuse Act against an employee who retains his laptop -- or even a BlackBerry -- or wrongfully deletes company information. This law gives employers the right to recover not only the hardware, but more importantly, the value or cost of recovering the information, regardless of whether it constitutes trade secrets or proprietary information. This is likely to be even truer when the employee's conduct violates company policies addressing such property.

In the end, these cases typically turn on the equities. Where an employee's conduct has been unassailable, he is most likely to have the least restrictions imposed upon him. However, where the equities are not on his side, a company has many tools that even in the absence of an enforceable noncompete -- or any noncompete at all -- all parties must be aware of and consider.

Russell Beck is a commercial and intellectual property litigation partner and certified mediator in the Boston office of Foley & Lardner LLP, heading the firm's interdisciplinary trade secret/noncompete task force. He can be reached at rbeck@foley.com or (617) 342-4031.

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