Legal Question in Business Law in California

Re: Boss Threatening to Sue if I Compete

Did you sign a non-compete agreement when you started working for him? And if so, what were the terms of the agreement? Many non-compete agreements are not legal.

Otherwise, there is probably nothing he can do about you working for a competitor unless he can prove that you took/are taking company secrets or clients.

Re: Boss Threatening to Sue if I Compete

California is one of two states that do not allow any type of non-competition agreements between employers and their employees and independent contractors that look like employees. The only exceptions are employees who are also owners of an entity and are selling their interest in the entity.

That being said, however, employers can and should protect themselves by the use of non-solicitation agreements, such that previous employees and independent contractors that look like employees are prohibited from soliciting customers and clients of the employer, and even existing employees of the employer for employment purposes.

California law provides that data can be afforded protection as a trade secret, if a company takes reasonable measures to protect its information, and if the information is valuable because it is secret. This data could be customer lists, business plans, spreadsheets, etc.

Of course, anyone can attempt to sue you. Absent violation of a non-solicitation agreement or California trade secret law, however, you should be safe.

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Re: Boss Threatening to Sue if I Compete

As long as you don't violate the 'unfair competition' rules, you will be ok. They are common sense. Basically, don't steal his business or use his customer list. He can threaten, but he'd have to have evidence of violation to bring successful legal action. If you need legal help and consult in this, feel free to contact me.

Re: Boss Threatening to Sue if I Compete

California law expresses two policies in this field: freedom to compete and prohibition of misappropriating trade secrets. You are free to join a competitor or start your own business in competition with the former boss. You are not free to take the boss's Rolodex on your last day of work.

Also, keep in mind that there is a big difference between being able to sue and being able to win. Big companies threaten suits and even file suits they won't win in an attempt to coerce former employees to stay in line.

I have defended people like you from suits like the one you fear, and have obtained settlement and dismissal; but the poor clients didn't really feel like winners because the defense cost them thousands of dollars.

Re: Boss Threatening to Sue if I Compete

Anyone can sue, the question is whether or not they have a good case.

He does not have a good case against you. After you are hired, as to talk to corporate counsel and have them show you how you can obtain or develop a customer list without using any of the information (potential trade secrets) from your old employer.

Re: Boss Threatening to Sue if I Compete

An employer in California can sue a former employee who misuses that employer�s proprietary information in a subsequent job.

Proprietary means just that: information (e.g., a confidential customer list) that gives an employer a competitive advantage and that is distinctly �owned� by the employer as opposed to being publicly shared. If you knew it before you joined, unless you owe a confidentiality obligation to the entity from which you learned it, you can use it when you leave. If everybody at the job knows it because no one keeps it secret, it is generally regarded as public. If your new employer knows this information without having received it from you (in your case, you note that knowledge of the target customer base is actually a specialty area of the new employer), there is no misuse of proprietary information. In all such cases, the information is not proprietary and can normally be freely used without obligation to the former employer.

Except as needed to protect proprietary information, California law generally prohibits non-compete obligations against former employees and treats them as invalid restraints on trade. Even if you signed a non-compete agreement, you would normally not be bound by it � except as it is tailored to prevent misuse of proprietary information.

An example of what is off limits: if an employee learns confidential pricing information of an employer, leaves that employment, and then does a price-shaving campaign targeted to the former employer�s customer base. This very likely would be a misappropriation of trade secrets and would be actionable as unfair competition.

Since interns normally don�t have access to such proprietary information, this would seem to be a case in which you could freely go to work elsewhere without obligation to your former employer.

The hotheaded response you got from your boss is a bad sign, as it does not take much in this area to cook up an abusive lawsuit for one who is spiteful and motivated. Since chasing after a former intern on thin or frivolous grounds is pretty bizarre, however, you are likely safe.

I would also recommend consulting with a knowledgeable lawyer to review all the facts of your situation and to determine whether there are any risks of violating any obligation legitimately owed to your employer. I would do so in particular so that the lawyer can evaluate the practical risks and the cost-benefit aspects of your potentially being sued by an angry boss even if you are in the right. In the meantime, the above should give you a general picture of how this area works without attempting to assess your situation in any detailed way.