Non-compete clause upheld

An employee violated his non-competition clause when he abruptly left the company and established a competing business, ruled a federal district court in Idaho. The employee took a large client with him and left the former employer’s office shuttered. His employer sued, but before the trial began, the employee tried to escape any possible financial consequences by declaring bankruptcy. The bankruptcy court said the debt was nondischargeable, because the employee had wilfully and maliciously injured his former employer.

“The most damning evidence,” the court noted, was the “manner” in which the employee left his former employer. When another employee arrived at the building he found the doors locked, curtains drawn, and phones forwarded — the business “was essentially closed.” The court noted that the employee took these actions on the exact date that the large client’s contract was set to expire, in spite of being subject to a non-competition clause with his employer (In re Joseph Stanley Visser, D Id, Apr. 2014).

Tips: Many courts are reluctant to enforce non-compete agreements, but this was a pretty clear violation. Generally, courts will only enforce them if they are written, signed, and reasonably necessary to protect an employer’s legitimate business interests. The duration, geographic area, and scope should be as specific as possible, and reasonable under the circumstances. For more information, see our Legal Guide, “Noncompetition Agreements” (3249).