Page 36 - MetalForming December 2009

Doug Ehlke, a national board- certified civil trial lawyer, has for more than 20 years represented metalforming companies in OSHA litigation and in labor- union elections. His law practice emphasizes labor law, personal injury, product liability, probate, estate planning and environ- mental and employment discrimination law.
Ehlke Law Offices
28840 11th Avenue South Federal Way, WA 98003-3705 Phone: 253/839-5555
Fax: 253/874-5475
E-mail: dehlke@ehlkelaw-
offices.com
Apreviously terminated sales man- ager subject to a three-year non- compete restriction begins to call on the old employer’s key customers for his new employer—a competitor in the same industry—and lures major cus- tomers away with lower bids.
A former employee discloses to a new employer information about his former employer such as:
• Efficiency factors gained from com- ponent experience;
• Nonstandard coefficient of friction used in system design;
• Contents of three pending patent applications; or
• Product costing and pricing infor- mation.
What can the former employer do in these situations to stop actions of the former employee and/or to seek dam- ages? Legal lawsuit remedies range from injunctions to cease behavior to civil damages and attorney’s fees (against the former-employee and/or potential- ly against the new employer).
Where do you start? Hire a lawyer with experience in enforcing or defending noncompete clauses and have the lawyer review the employment agreement.
The Rules of Law on Noncompetition Agreements
1) A covenant not to compete is valid if it is reasonable in view of all circum- stances of the particular case, and is a question of law.
2) A covenant not to compete should be no greater in scope than is necessary to protect the business or goodwill of the employer. If the scope of a particu- lar provision is broader than necessary, courts have discretion to rewrite the contract to make it more reasonable.
3) There must be legal consideration exchanged for the agreement to be enforce- able. As a general rule, legal considera- tion exists where the employee enters into a noncompete agreement when he is first hired. Covenants entered into after the beginning of employment require independent consideration beyond continued employment.
4) Protectable employer interests include: • Goodwill associated with the rela- tionship between the business’ cus-
tomers and the departing employee;
• Confidential and proprietary infor-
mation and trade secrets; and
• Customer hold aspect of goodwill may or may not be a protectable inter- est, it depends on the facts. In evaluat- ing whether customer hold is a pro- tectable interest in any given case, consider the quality and quantity of contact between employee and cus- tomers and the extent to which the employee-customer relationship will actually influence a customer’s pur- chase decision. Ultimately, the ques- tion is whether personal relations between employee and the employer’s customer are “such as to enable the employee to control, in whole or in part, the business of such customers as a personal asset.” Arthur Murray Dance
Studios, 105 N.E.2d at 706.
What are Nonprotectable Interests?
While defection of a key employee to a competitor will usually result in a loss of business for the employer and/or advan- tage to the competitor, it is not always actionable. Prevention of ordinary (as opposed to unfair) competition is not a legitimate protectable interest. An employer cannot restrict activity of an employee based upon his or her training,
34 METALFORMING / DECEMBER 2009 ONLINE
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YOU & THE LAW DOUGLAS B.M. EHLKE
Covenant Not to Compete 101