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Scales of Justice

Lawsuits about Non-Competition Agreements Are on the Rise

There’s a debate raging on about how fair non-competition agreements are and how to find the right balance between protecting employers’ valuable information and fostering entrepreneurship. The basic issue is the fact that employees are exposed to valuable data while working for an employer, including client lists, processes, marketing strategies, financials, and more. This is all crucial and secret information that an employer uses to maintain a competitive advantage.

Using Sensitive Data

If employees use this information to work for a competitor or build their own business to compete with their old employer, it harms those existing businesses. On the other hand, as any competent business attorney in Seattle knows, it can be tough on ex-employees to stay true to the terms of a non-competition agreement, especially if the requirements get too stringent. This is evidenced by the fact that the incidence of non-competition agreement lawsuits has gone up by more than 60% in the past decade.

What is a Non-Competition Agreement?

In a nutshell, the non-competition agreement is between two parties and is designed to prevent an employee from deriving an undue amount of benefit from previous employers and their information. Here’s an example. You go to work at a financial services firm and notice that most clients seem to respond to a particular investment. As a result, you decide to start your own business offering clients this specific investment, and you also take a number of clients from your recent employer with you as you start the company. If your employer had you sign a non-competition agreement at the beginning, you could be in breach of that agreement and brought to court.

Solving the Issue

Ex-employees who move on to a new employer or start a business are facing some hardship. If you have a new idea that came from your time working at an employer, does the employer truly own that idea? Is it feasible to keep people in a certain industry from working for any competitors in the period after leaving their existing employer? The fact is, Olav Sorenson of Yale University has found that enforcing non-competition agreements does impede innovation.

Whether you’re starting your own business after some time learning from an old employer, or you’re the employer worried about employees stealing all of your confidential ideas and information, it’s worth it to talk to a business attorney in Seattle to ensure you understand how to protect yourself in the future.