As business has become more technology driven, courts have continued to recognize the potential damage of an employee’s violation of a restrictive covenant prohibiting competition with his or her former employer or protection of the former employer’s confidential information. As a result, the evidentiary threshold which must be met by the employer to obtain a temporary restraining order prohibiting violation of the restrictive covenant is low, as the recent opinion in Lakeview Technology, Inc. v. Robinson demonstrates.
In Lakeview, Eric Robinson was a vice president of sales for Lakeview Technology, Inc., a vendor of software which enables users to access their data during computer system outages. During his employment, Robinson entered negotiations with one of Lakeview's competitors for a position. Robinson never advised Lakeview of his negotiations or that he later accepted the competitor’s offer of employment. Instead, Robinson told Lakeview he was pursuing real estate interests after his resignation.
Prior to terminating his employment, Robinson removed certain confidential Lakeview sales information, which he took with him to Lakeview’s competitor. When Lakeview learned of Robinson’s deception, it filed suit, alleging Robinson violated the restrictive covenant and confidentiality provisions of his employment contract. Lakeview immediately sought a temporary restraining order to ensure that Robinson’s violation of the restrictive covenant did not damage Lakeview’s business. While the trial court denied the temporary restraining order, the Appellate Court granted Lakeview’s request.
In granting the temporary restraining order, the Appellate Court noted that even though Lakeview had not experienced monetary damages or any loss of business as a result of Robinson’s conduct, there was sufficient risk that Robinson would continue to violate the restrictive covenant and use Lakeview’s confidential information. Robinson’s history of lying to Lakeview to serve his own financial interests, combined with the statements he made to third parties that he was not bound by the restrictive covenant and confidentiality provisions, created a strong likelihood that Robinson would not abide by such provisions. Moreover, violation of the restrictive covenant and confidentiality provisions could result in significant damage to Lakeview’s business. Thus, the Appellate Court stated, Lakeview was entitled to a temporary restraining order.
Employees subject to a restrictive covenant and their new employers should each seek the advice of counsel prior to the hiring such an employee. A substantial part of our legal practice includes issues related to employment contracts and non-competition and confidentiality provisions. We can advise the employee and his new employer of the steps to be taken by the employee when terminating his employment to avoid the possibility of a violation of the former employer’s restrictive covenant. While such steps may not prevent the former employer from filing suit, they will increase the employee’s and new employer’s likelihood of success in defending such a suit.