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When Should You Sue an Employee?

By Ephrat Livni, Esq. on January 11, 2016 | Last updated on March 21, 2019

Your best worker just left the business and you are sad to see her go. But when she posts up across the street from your shop and starts selling the same products to your customers, your disappointment turns to rage. Do you have any recourse? Can you sue her?

You should consider suing an employee if they breach an employment agreement. So if you have a non-compete clause in the employee's contract and it covers a few years and a 100-mile radius but now she's waving at you from her window, it's time to make a move. Enforcing that non-compete clause could be very meaningful.

Non-Compete Clauses

The reason you as an employer want your employees to sign non-compete clauses is to protect what you have worked hard to build. In order to work with others and have their efforts be meaningful to your business, you must share precious information -- everything from client lists to trade secrets are at risk when you bring in someone new.

Employees sign non-compete clauses so that they can take a new job. While they may certainly benefit from their experience working for you, they cannot walk away with your goods, whether physical or abstract. It is a common practice to ask them to sign a non-compete agreement.

But not all states will validate a non-compete clause. California, for example, sees these as threats to innovation and judges very rarely enforce these. But there are other means of protecting trade secrets, such as non-disclosure agreements. Depending on the type of business you are in, there may also be intellectual property protections that you can use as a basis for suit.

Passing Muster

For a non-compete clause to pass muster you must be able to show three things:

  • Good Business Reason: There is a good business reason for the clause and it does not just punish departing employees.
  • Employee Benefit: The clause cannot benefit the employer exclusively, but often just making the job offer based on willingness to sign the non-compete clause is considered benefit enough.
  • Reasonable Terms: The non-compete clause cannot extend too long or too far and wide.

Arbitration Option

Most employment contracts now have an arbitration clause, meaning that workers very often have to agree to settle disputes in arbitration rather than litigation in order to take a job. If you have such a clause in your employment contracts, you will not sue but take the issue to arbitration. This will likely result in a resolution that costs less in lawyer's fees because it is reached more quickly and easily than a court-ordered solution.

Talk to a Lawyer

If you believe an employee breached a duty to you, speak to an attorney about a lawsuit or mediation. Find out your options and get guidance.

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