Breaking Up With Your Employer?
So you are thinking of leaving your employer and you are an employee who works either in New York or Connecticut. What follows is a roadmap to follow to leave your employer in a manner that will minimize your exposure to being sued by — wait for it, your ex-employer. Yes, workers are finding themselves increasingly in the sights of ex-employers who for a host of reasons want to create obstacles to their talent going to work for a competitor.
Covenants Not To Compete And/Or Not Solicit
1. If you signed an agreement with your soon-to-be ex-employer that prohibits working for a competitor and/or soliciting certain customers and/or soliciting for employment your ex-coworkers for a period of time after separation, then dust off that document and ideally review it with an attorney. Do not assume that your soon-to-be ex-employer won’t sue you. The current environment is such that many companies want to send a message that they will put up hurdles and road blocks to the flow of talent out of their company. One of the core tools for doing so is enforcing against ex-employees covenants not to compete and/or not to solicit customers and/or its current employees. In both Connecticut and New York, there are bases that courts can invoke not to enforce these agreements but that outcome is always after litigation has occurred – usually, in the form of expedited and expensive motion practice (i.e., preliminary injunction). For example, in New York, it may be that an agreement that prohibits post-employment activity of an ex-employee is not enforceable where the employer fires the employee. The highest court in New York has yet to rule whether, under such circumstances, post-employment restraints are enforceable. Until the Court of Appeals rules on the issue, neither an employee nor an employer can be certain whether a post-employment restraint after being fired will be enforced. In Connecticut, it may be that a court will not enforce a covenant that your employer forced you to sign after you began employment. It appears to be a minority opinion among trial courts but the “defense” is still out there and thriving. In spite of these potential “defenses” to covenants not to compete and/or solicit, employees and employers confront unappealing uncertainties in this area. Uncertainty in such circumstances usually favors employers who have the deeper pocket, usually, to fund litigation. Even though a soon-to-be ex-employee thinks that the covenant he or she signed will not be enforced, he or she should always disclose to a potential new employer the existence of the covenant. In most instances, a new employer will request that you disclose the existence of a covenant in its application in any event. Be truthful. By disclosing the existence of the potential restraint, you will not only remove a potential ground for termination should it come to light later on, it will initiate discussions with your new employer about indemnification of your attorney’s fees should your ex-employer sue you. You will need the help to defend yourself. You will also want to negotiate, if possible, a salary with your new employer, even if you are required to “sit out” pending the outcome of preliminary injunction practice focused on the enforceability of the covenant. It is great to get a free attorney representing you while you are sued; even better if your new employer pays you even when you are forced to stay at home for a period of time.
Duty Of Loyalty Owed To Ex-Employers
2. If you did not sign a covenant with your soon-to-be ex-employer, then know that in both New York and Connecticut you still owe a duty of loyalty to your ex-employer when you move on to your new employer to the extent of not making use of its trade secrets and/or confidential information. What constitutes a trade secret and/or confidential information in New York and Connecticut is a murky issue. Basically, it has to be information that is not publicly available, that your ex-employer took some pains to prevent the wide disclosure of and that took time to create and/or develop. By way of example, a customer list that can be created from scratch in a few hours by doing internet searches is neither a trade secret nor confidential information. On the other hand, a customer list that is comprised of each customer’s purchase history and preferences is probably a trade secret and/or confidential information. You will need to confer with an attorney if you want to use information you are carrying over from work at your prior employer and it is something more than a mere customer list that you can build back up from scratch in less than a day. Of course, if you archived information that you brought with you to your soon-to-be ex-employer and kept it under lock and key, then you have every right in the world to dust off that information and commence using it at your next workplace. Unfortunately, few employees do this and are thus placed in the position of having or needing to use information that is a hybrid of information they brought to their soon-to-be ex-employer and information they obtained or created while at that employer. Don’t make the mistake of automatically believing that you own the hybrid. You may not: from which fact much pain may result.
Short List Of Don’ts For Soon-To-Be Ex-Employees
3. Do not use your current employer’s time and resources to develop a competitive business. Do not start marketing a competitive business that you intend to start after leaving your current employer with the clients of your current employer. While obvious I will say it anyway: do not steal an opportunity from your current employer for a competing business that you run, own or for which you will be compensated. In both New York and Connecticut, you owe your employer your full loyalty, which means you do your employer’s business and only its business during company time, until the day you quit. If you breach your duty of loyalty in this regard in New York you can be liable in the amount of any profits that should have gone to your ex-employer and/or the amount of compensation that you received while being disloyal. In Connecticut, your liability will more likely limited to the former (lost profits).
Remember that companies these days are ready to sue. Consult with an attorney when you are moving to a new employer, especially if you signed a covenant not to compete and/or solicit.
Disclaimer: Cardi & Edgar LLP provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship. Attorney Advertising.