Competition/trade secret issues
Dear Mel,
Your site has proved to be most informative and I thank you for that.
I'd like to map out my situation for you as succinctly as possible in hopes that you can provide me with some general advice on how to proceed.
I've been working for and running an after-school program in New York, NY the last five years. The first 4 working for a friend who started the program and for the company he merged with a couple of years ago. Last year, my friend moved out of NY and sold it to that company. I ran the program for that company last year.
It's an outdoor adventure program and I work at different private schools. I pick the kids up from school, take them to Central Park and play around for a couple of hours. I teach them things like rock climbing and hiking, and we also play anything from hide-and-seek, to tag, to capture the flag. For me to run the program at one of these schools, I have to get a little blurb about the adventure program into each school's after-school brochures. From there, it's up to the parents to sign their kids up for any of the listed programs, which range from sports, to cooking, to computer design, etc. It's up to the schools to decide who they want running their after-school programs.
After a falling out, I'm no longer with this company. I never signed anything in my few years there, especially not a non-compete clause. I know of 3 schools that would gladly do the adventure program with me instead of them in a heartbeat, if I started my own program. I don't think they have a patent on playing games in the park with kids and I know there's no law saying I can't run a competing program.
My questions are this: Whether they would have a case or not, the company has threatened to file a lawsuit against me, which would trip me up financially. I want to be prepared for that. Where do I stand legally and what would my next move be if they did? Do I need to hire a lawyer first? Also, regardless of whether I decide to start my own program, I want to tell the various after-school directors why I'm suddenly not there, out of courtesy if nothing else. But I feel like I should be careful of how I word things, so that nothing could be used against me down the line. I certainly wouldn't bash my former employer, but I want to explain to them why I'm not around anymore and I want to know if I need to be careful with my words. Some of the schools start up next week, which is a big part of my panic in deciding whether or not to make a move.
Most of the schools' brochures have already gone out with a description of the adventure program. Most of the schools (about 10) know and trust me and expect me to be there. They don't really have a relationship with anyone else from my former employer and don't seem too comfortable sending their kids out with individuals they don't know. If an after-school director decided he or she wanted me to run it instead of my former employer, should I? Some of the brochures mention the company specifically, some make no mention whatsoever. Some schools haven't put their brochure out yet, in which case I could conceivably get my own program description in their brochures instead.
Would I be in violation of some sort of trade secret law if I used lesson plans that I created while working for them, using the basic model, business plan, contact information, pricing structure or anything like that? I mean, instead of an "adventure" program, I would probably call it something like "explorers," but I would basically be teaching the same things and playing the same types of games with the kids.
The schools may drop my former employer completely, meaning these kids may end up with no program at all, which I don't want either.
I would appreciation any insight you can offer me and am curious to know your thoughts on this matter. I apologize for the length, I just wanted to get in as much as what you may need to know to form a viable opinion.
I realize you're busy and I haven't given you much time to respond. Unfortunately, my former employer just decided to renege on our agreement, so I'm left scrambling. Thank you so much for your time and I look forward to your response.
Sincerely,
Mike Mohr
Answers (1)
First, we need to understand that it would be entirely inappropriate for an attorney to give any person advice about a specific situation in a public forum like MELS. There are a number of reasons for this, including waiving attorney-client privilege, and tipping your hand to the other side in litigation. After all, there is no filter on this website preventing employers from viewing its content.
So, to provide a general answer to your query, there are some basic policies behind the law on employee non-compete agreements. One policy is that favoring a competitive market place. Businesses often like to extoll the virtues of the competitive market-place. But, from my experience as a former antitrust attorney with the federal government, most of the extolling is just for show. Businesses really hate competition, unless, of course, your business happens to be the top dog in a particular market which isn't particularly competitive. As translated into the employment area, this government policy favoring competition means that court hate to do anything that would prevent a new competitor (that is, former employee) from entering the marketplace.
Another strong policy behind non-compete law is that government should avoid doing anything which creates an obstacle to someone earning a independent livelihood. We want to do as much as possible to prevent you from ending up on our welfare rolls. So, courts have generally looked with disfavor on non-competes in employment agreements because non-competes prevent former employees from earning a livelihood in a field in which they have recent experience.
Another policy working in this area is the policy fostering innovation. This policy actually favors employers. (But it can also help innovative new competitors too.) It is in part embodied in laws such as the patent laws and the copyright laws. But the policy protects only true innovations.
Face it, starting any business requires a lot of work and investment. And it is risky. There is no guarantee that your business will succeed. You would like to protect your work and investment, but the fact is that most of that effort is not really unique or innovative. In other words, few business efforts are so special that courts will grant it any kind of protection. As a result, though courts will protect certain efforts made by an employer in developing and maintaining a business, those efforts have to be pretty special before they get that protection.
The upshot of all this is that, without a non-compete agreement, an employer has very, very little chance of preventing a former employee from starting a competing business. Even with a non-compete agreement, the employer will have an uphill battle against the former employee.
Now, that talks about end results. That is, in the end, former employees usually win lawsuits in which employers try to prevent those employees from competing against them. But this does not prevent employers from bringing the lawsuits to begin with. In other words, the employee usually wins, but only after having to pay the costs of a lawsuit.
The fact is that anyone can sue anyone else for anything. A lawsuit is the procedure for determining whether that anyone really has a valid claim. So, yes, you can be sued by your former employer, but that says little because you can be sued by anyone for anything anyway.
Under the American rule, each party pays their own costs. There are few exceptions to this rule, and there is nothing specific to employee non-compete litigation which would make the former employer responsible for the former employee's costs. Although in theory, there may be ways for a former employee to recoup the costs of a non-compete lawsuit, the likelihood is that the former employee will have to foot the bill for the litigation on his or her own.
posted by David M. Lira | Sep 5, 2003 08:45 AM [EST]
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