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socrateaser, Lawyer
Category: California Employment Law
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Experience:  Retired (mostly)
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I am starting a technology-driven company which will employ

Resolved Question:

I am starting a technology-driven company which will employ the former CEO of a similar company, and the IT director of the competitor. The IT director currently works for the competitor and the CEO left the same company 2 years ago.

Beyond stipulations in their respective non-compete agreements, are there other issues we should be aware of, and be ready to address legally? For example, could the competitor sue, claiming the start-up company "raided" the competitor for staff, and proprietary processes were unlawfully used by the start up, which were developed at the competitor?

I am thinking of the issues which Mozilla faced, where the founders were sued by former employers of the tech staff, and paid $3 million in settlements.

The start-up and competitor are both in California.
Submitted: 5 years ago.
Category: California Employment Law
Expert:  socrateaser replied 5 years ago.
The general issues of concern are:

MISAPPROPRIATION OF EMPLOYER'S TRADE SECRETS. Claims that an employee has specialized knowledge and is using it to a former employer's detriment is actionable against the new employer and former employee.

BREACH OF COVENANT NOT TO COMPETE. Although restrictive covenants are generally void under Bus. & Prof. Code 16600, an employee who entered into an employment contract containing a restrictive covenant pursuant to the law of another jurisdiction (e.g., employee worked in NY, under contract with noncompete cluase, then moves to California) , can be held liable for the breach of covenant.

SOLICITING FORMER EMPLOYER'S CUSTOMERS. While this sort of competitive activity is also generally protected per B&P Code 16600, the misappropriation of the former employer's customer lists can be enjoined and damages awarded, as a trade secret violation.

SOLICITING FORMER EMPLOYER'S CUSTOMERS. Once again, protected by B&P Code 16600 -- however, if a former employee's contract had a fixed-termination date (employment not "at will"), then the former employer can sue the new employer for "intentional interference with contractual relations," if the employee quits the existing contract at the instigation of the new prospective employer.

Hope this helps.

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