Real-World Solutions To Real-World Challenges

Noncompete clause focal point in case settled in NY federal court

On Behalf of | Mar 16, 2018 | Business Litigation |

Company principals in New York and nationally obviously put a premium on the high-value work that key employees do for their enterprises. In tandem, they sometimes have legitimate concerns when such workers terminate their employment and take their talents to competitors, working in the same or a similar field.

That concern is of course driven by fear that a worker might provide a business rival with proprietary company information and trade secrets relating to critical processes and know-how. Leaks can obviously have devastating consequences.

Careful managers often respond to that potentiality through the execution of noncompete agreements with select employees. Those agreements are invoked when there is a concern that a new company is unlawfully benefiting from the receipt of confidential data.

A case in point is provided by a matter just concluded in a settlement between two national companies filed in a New York federal court.

The key facts in that case can be quickly sketched. A high-ranking human-resource official left IBM to assume a similar position with Microsoft. The former company sued the ex-worker for violation of a noncompete agreement, alleging that she was illegally transferring IBM internal information concerning hiring and diversity policies to Microsoft.

The matter was ultimately settled by delaying the employee’s start date to a time mutually agreed between the parties. Microsoft denied having any interest in any of IBM’s diversity strategies.

The case is broadly instructive. For starters, it highlights the key point in noncompetes that would-be restrictions must be reasonable in time and scope. IBM and Microsoft essentially took a middle ground on the worker’s new hiring date by delaying it a few months; the noncompete had called for a one-year delay.

Moreover, the matter demonstrates the ongoing process of a noncompete-focused case as it progresses. We note on our business law website at R3M Law in Manhattan, for example, that we often “move quickly in order to get temporary injunctions or other forms of relief” to mitigate downside consequences for a client as a matter progresses.

A similar pattern prevailed in the IBM/Microsoft litigation, with a judge issuing a temporary restraining order pending an injunction hearing. The parties ultimately settled the matter prior to the hearing date.