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Deep Duty: When Employers Sue

October 16, 2013

It doesn't happen often, but I sometimes get calls from workers who are being sued by their former employers. You won't be surprised to learn that these workers are pretty panicked. Getting sued is scary, especially if you're being sued by your former employer. After all, they know a lot about you, they probably have much more money than you do, and the idea of getting sued by them is just downright frightening.

Most of what I see involves former employers claiming that their ex-employee stole "trade secrets" or "confidential information" when they went to work for someone else. The run-of-the-mill case involves the former employer whining that their ex-employee stole their customers or convinced their other employees to work someplace else.

I don't get too concerned when I see these claims. Although I'm sure there's a customer list out there somewhere that's a trade secret, I haven't seen it yet, and California allows you to compete with your old employer for their customers as long as you don't use trade secrets or confidential information in doing so.

For almost 150 years, California has been pretty clear about this: the right to compete fairly outweighs the employer's right to keep its customers. California long ago slammed the door shut on noncompetition agreements, and courts through the years have hammered nails in the door jamb to keep it shut.

Now, though, one California appellate court may have cracked the door open just a tad.

In Angelica Textile Services v. Park, the California Court of Appeal ruled that Angelica Textile Services could proceed with its lawsuit against Mr. Park, its former employee. Angelica claimed that Mr. Park breached his employment contract, as well as his duty of loyalty to the company, all while still employed there.

Did you know that you had a duty of loyalty to your employer? If it sounds one-sided, that's because it is. Your employer has a duty to pay you on time, not discriminate against your or harass you based on any protected activities or protected acts . . .  and that's about it. Your employer doesn't owe you any duty to manage you well, pay you what you're worth (as opposed to what you agreed to take), or serve edible food in the cafeteria. You, on the other hand, have a duty to give your employer your best effort while working there. 

Mr. Park's case was a little different, though. He was a Vice-President, so he had an even higher duty of loyalty than most employees. According to Angelica Textile, Mr. Park tried to set up a competing business *while working for Angelica.*

If Mr. Park had waited until he wasn't working for Angelica anymore, he might have been in the clear doing what Angelica accuses him of doing (assuming he didn't use any trade secrets to compete against them). Because he was working for them at the time the alleged actions took place, that could be a breach of duty if the allegations are true. Also, Angelica's attorneys did a good job drafting their allegations so that some of them didn't require that Mr. Park have used trade secrets. This way, they stayed away from the law governing trade secrets (called the Uniform Trade Secrets Act), and got to keep some of their claims.

This case also went a little further than I've seen other cases go. I've argued successfully to courts that soliciting employees isn't illegal, but this case, without any real analysis, just dives in and swims the other direction. This could come to a head if another appeals court explicitly disagrees. That's what brings cases to the attention of the California Supreme Court.

I'll have more to say on anti-solicitation agreements and convenants not to compete in a future post.

 

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