This is Part Three of my 4-part blog series on covenants not to compete. If you have not read the first 2 parts, please click on the link at the bottom of this page to redirect you to Part One and Two. To summarize, in Part One, I addressed the “Who, What, When, Where and Why” of non-compete agreements. In Part Two, I discussed drafting considerations an employer should consider to ensure non-compete agreements are in compliance with Texas law. In this third installment, I will discuss the steps an Employer can take when they discover a former employee is in violation of a valid non-compete agreement.
As an employer, the first threshold question to ask is whether the non-compete provision at issue is valid. So long as the agreement is valid, an employer may take several steps to ensure its rights are protected. In practice, the most effective first step is to send a cease and desist letter to the former employee reminding them of their non-competition obligations. Also, it is a good idea to enclose a copy of the employment agreement containing the relevant non-compete provision. Also, if you know information about the company where the former employee is working, you may also send a cease and desist letter to the new employer notifying them of the former employee’s non-compete obligations. I recommend sending all correspondence in this stage by certified mail, return receipt requested, so you can ensure the correspondence was received by tracking your certified mailer number. It is standard to allow a former employee or current employer at least thirty (30) days to cease from competing. If the activity continues beyond the 30 days, next logical step is to file suit or a notice of arbitration, depending on the terms of the non-compete agreement at issue.
I always advise clients to consider litigation and/or arbitration as their last option, mostly because of the cost and uncertainty related to hearing and trial dates. However, if the activity continues without regard for the former employee’s contractual obligations, a former employer is left with no other option but to file suit. Before taking this step, I sit down with my clients and provide them with an estimated cost breakdown, basically providing an estimate on legal fees from pre-trial through appeal. It is imperative that your attorney has walked through all potential costs and fees related to this type of litigation.
If you or someone you know is dealing with an issue involving non-compete agreements, we would be happy to help. Stay tuned for Part Four where we will discuss litigating a non-compete agreement from pre-trial to closing arguments.
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