Enforcing a Non-Compete Agreement: Prevention and Investigation

Posted by Pamela S. on Wednesday, October 17th, 2012

Your employee has signed a non-compete agreement or a clause in their contract. Now they have left the company. How do you know that they are abiding by the contract? You can’t keep track of everyone who leaves your employ, but you can prevent and investigate violations, and protect your proprietary information and client base.

A non-compete clause (NCC), or a covenant not to compete (CNC) is an agreement where your employee is bound by a legal contract not to compete against your company for a certain period of time, and in a certain mile radius. Most states recognize non-compete agreements, and will enforce them.

Preventative Measures

• Your non-compete clause or agreement should be prepared by a lawyer. You don’t want to make it impossible for your former employee to make a living in their profession, but you need to ensure that they cannot contact your clients, or use information obtained
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  during their employment regarding trade secrets, operations, or business practices. A former employee may use this information to start their own business or work for a

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  competitor.

• Preparing an enforceable non-compete requires thought. Let’s say you manufacture pet supplies, but your focus is on fine quality, eco-friendly pet products. Your former sales rep knows pet products inside and out. Where do you draw the line? Can you stop him from selling all pet products, or only eco-friendly products? What if he bad mouths your company to retailers and takes your prime display space? That is why drafting the agreement is so important.  Here is a sample of a very basic agreement:

• During an exit interview, make sure that the employee has a copy of the agreement and understands the ramifications of violating the agreement.
• Let the employee know that prospective employers may contact you for a reference. This provides you with information regarding their future plans. This may not be possible if the employee left on bad terms.
• Ensure that all clients your employee serviced are immediately aware that this individual is no longer with the company. Have your new representative contact your clients for an introduction.
• Conduct pre-employment screening on new hires. You could be liable if you hire an individual who has a non-compete agreement with a former employer. If this person is willing to do it to them, they will do it to you.

Investigating Violations

• If the employee was provided with company equipment, such as a laptop and smartphone, there may be evidence of their future plans, such as emails. Employees who become aware that they are going to be terminated often wipe the computer of their files, but an IT security specialist may be able to recover the information.
• Keep your eyes and ears open. Employers often get tipped off that a former employee is attempting to contact their clients.
• If you have even the slightest doubt about this individual, check the ex-employee’s social media activity, especially sites like LinkedIn and Facebook. Tech company TEKsystems won a lawsuit against a former employee, TEKsystems, Inc. v. Bolton, because Bolton breached the non-compete when he contacted clients through LinkedIn and other websites.
• Watch for any new companies opening up that are similar to your business.

A private investigator is your best choice for determining whether your former employee is violating your agreement. An investigator can conduct database searches, such as determining whether the individual has registered a business, obtained a business licence or engaged in other activities that would indicate they are starting a business. Sheer Investigations understands how important your intellectual property and client base are to you. The investigation business is just as competitive as yours.

Just because a former employee isn’t going to an office every day, doesn’t mean that they aren’t breaking your agreement. More people work from home offices, especially if they are starting their own business and don’t have funds for an office. An investigator can conduct inquires and surveillance to determine the individual’s day to day activities. Your former employee may be working for your competition.

When an investigator obtains the evidence, a lawyer can send a cease-and–desist letter to the individual and if applicable, to their new employer. If there is no other recourse, you can file a lawsuit.

Former FBI Assistant Director Tom Sheer has recruited the best from the FBI, DEA, IRS and Secret Service to build a formidable team at Sheer Investigations. Our private investigators have the sensitivity and experience to handle the most delicate investigations.