Non-compete agreement may shield confidential company information

Baton Rouge area business owners may take interest in a recently filed lawsuit between a benefit plan administration and consulting firm and a former employee. The case illustrates important aspects of employment law that every business should consider in its relationship with employees. Although the outcome of the case remains to be seen, the situation faced by the consulting firm may strike a familiar note with many Louisiana employers.

According to court documents, the plaintiff is in the business of providing consulting services and third-party administration of employee benefit plans. The defendant is a former employee who abruptly resigned after approximately 16 months with the firm. The employee gave various reasons for his decision to resign, but the consulting firm learned that he had taken a position with a competitor shortly after his resignation.

The consulting firm claims that the former employee took confidential company information on his laptop. The firm claims that its competitor has previously only engaged in clinic administration and has never possessed the type of information that would enable it to provide plan consulting and third-party administration services. However, since the competitor hired the former employee, it has acquired three of the consulting firm’s former clients.

Fortunately, the consulting firm had the foresight to have its employees sign a non-compete agreement. The agreement prohibits employees from working for any competitor within a 30 mile radius for a period of 12 months after the last date of employment with the consulting firm.

The consulting firm seeks an order enforcing the non-compete agreement and prohibiting the former employee from using any of the company’s confidential information. The firm also seeks punitive damages in addition to its costs in the action.

The court will consider a number of factors when deciding how to enforce a non-compete agreement, and it remains to be seen how the court will apply the agreement at issue in this case. Clearly, though, the consulting firm would have a much more difficult time blocking the use of its confidential information in the absence of a non-compete agreement.

Source: The Southeast Texas Record, “Health administrator says former employee violated non-compete agreement,” Kelly Holleran, Aug. 21, 2012