Unfair Competition by Employees and Former Employees

Orange County Unfair Competition Attorney

Employees owe a duty of loyalty to their employer. This means that the employee has a duty to act for the benefit of the employer when conducting their duties on the job. Additionally, an employee must give preference to the employer when conducting any business similar to that of the employer. Everything acquired from the employee by virtue of employment also belongs to the employer. Violation of this duty can give rise to damages although courts must balance this against the policy that favors competition in the market.

Solicitation of Business from Former Employer's Customers

Former employee’s duties to their former employer are limited. Although employers in most states are allowed to enforce non-compete agreements against former employees, these agreements are invalid in California except for very limited circumstances such as between business partners. Nevertheless, an employee is not allowed to steal or otherwise misappropriate trade secrets of its former employer in order to gain a competitive advantage against it. The employee’s use of trade secrets of a former employer is a form of unfair competition that is illegal in California. Use of an employer’s customer list classified as confidential is also unfair competition.

Accepting Competitive Employment

An employee violates the duty of loyalty if they begin employment with a competitor while employed. However, merely accepting employment with a competition while employed will not violate the employee’s duty of care unless some other blameworthy conduct has taken place like a misappropriation of trade secrets.

Solicitation of Competitor's Employees and Employee Raiding

A competitor can hire another company’s employees. However, if a competitor begins soliciting employees in order to drive the other company out of business and prevent it from competing, the acts can rise to the level of unfair competition. The solicitation of a competitor’s employees for trade secrets is also a violation of unfair competition law.

Solicitation of Fellow Employee for Competing Company

Preparation to begin a competing business while employed is not in itself a violation of the duty of care. However, the solicitation of co-workers or current customers of an employer to help a competing company is an unfair business practice.

Organization of Competing Business

In the case Fowler v. Varian Associates (1987) an employee decided to develop a company to market an alternative to its employer’s products. The company would make the employee a business partner and would eventually seek clients from the same pool as that of the employer. The employer brought suit and the court found that the employee’s involvement in organizing the competing business violated his duty of loyalty to the current employer because he had a duty to let his employer know of the competing business and did not. However, keep in mind that simply beginning other employment off the job will not rise to a breach of the duty of loyalty unless it creates a real conflict of interest.

Concealment of Competitive Plan

Generally an employee may not compete with an employer while employed. However, employees can usually prepare to leave the employer to compete as long as it is not a violation of the above rules such as soliciting co-workers or clients. Nevertheless, business partners and corporate officers are held to higher standards. Merely preparing a plan to compete and concealing the plan is a breach of the duty of good faith and fair dealing.

Orange County Unfair Competition Lawyer

The Law Offices of Tony T. Liu provides skilled representation in unfair competition disputes. To schedule a consultation with an experienced California business law attorney call (714) 415-2007 today.

have a Question?
phone numbers