Employee mobility is a top issue for many San Francisco and Silicon Valley companies right now. Employee mobility is when an employee leaves an organization and moves to another company, particularly a competitor. This transition may trigger a number of complex and intricate issues that can potentially lead to litigation. Besides the personal animosity, disruption of business, and possible interference with strategic planning, the exit of a high-level executive or upper-management employee implicates California laws and public policy.
In an effort to minimize the risks associated with employee mobility, employers often require that their employees sign non-disclosure agreements (NDAs), non-compete agreements, and non-solicitation clauses that may or may not be enforceable, depending upon the employee’s location and other critical considerations. These considerations include whether or not the employee has equity rights in the former organization, the form of the business entity, and efforts by the employer to protect its intellectual property. Whether the exiting employee is coming from a partnership, a closely held corporation, or a large corporation with stock options may dictate whether the employee can work for a competitor or start their own business.
Our team also recognizes that employers hiring new employees on an executive and management level need to be mindful of the limitations of California Business and Professions Code Section 16600. While non-compete agreements and non-solicitation agreements together with contractual notice periods are not enforceable in the state of California, employees are nevertheless prohibited from taking confidential trade secrets from their employer. In addition to the advice and consultation we provide, we have engaged in successful litigation that has demonstrated our ability to enforce trade secret rights.
We counsel companies trying to protect trade secrets as well as executives and other high-level employees who seek to move to a competing organization. We provide assistance throughout the transition process, including contract review and advice on competing fairly without violating contractual and statutory obligations to their current employer.
Employee Mobility #1: Confidential Settlement; San Francisco County Superior Court
Our client was Chief Merchandising Officer for a well-established brand based out of New York. He was recruited to San Francisco to work with a nationally recognized women’s apparel company. A week after he was hired, he was fired because of his non-compete clause. After deposition and early discovery our client received a $2.3 million settlement.
Employee Mobility #2: Confidential Settlement; United States District Court, Northern District of California
Our client, a partner in an insurance brokerage business, was sued after he left to join a competitor. We were able to secure a dismissal and waiver of costs for our client.