DOUBLE STANDARD IN NON-COMPETE LITIGATION
If you leave your employer and go work for a competitor, you may be sued.
If an Executive leaves and works for a competitor, they may be sued too, but it will likely settle.
Last month I wrote about a Starbucks Executive leaving for Dunkin Doughnuts. Suit was filed and within weeks, the multi-million dollar case had settled. According to Wall Street Journal’s Marketwatch.com, Terms of the accord with Paul Twohig, “call for him to complete his initial training but not to begin work at his new employer, Dunkin’ Donuts, until Jan. 15.”
Further, according to Starbucks, Twohig agreed to pay Starbucks $500,000.
Is the $500,000 a Release? Probably. Did Mr. Twohig pay that himself? I seriously doubt it.
But the question remains, are Executives treated differently in non-compete litigation then the average employee?
We have seen many high profile cases where companies sue Executives. Amazon.com sued eBay over an Amazon.com executive. IBM has sued Executives going to Dell and Apple.
Suffice it to say, large companies like Executives to have non-compete agreements. They advertise them as being corporate assets, but a quick search on a corporation’s SEC filings will reflect many executives are released from the agreements upon departure.
My humble opinion is that they exist for stockholders (“Hey, we are paying this guy too much but don’t worry he can’t leave”)but Executives that do jump ship, are rarely hurt. Often times they have the financial backing of the new company. Therefore, if they get sued, they don’t have to pay for attorneys fees or be worried about losing their new job.
So what can the old employer do? Very little but waste time and money in litigation.
Without the ability to scare said Executive into submission, often times high dollar settlements are reached, and quickly as seen in the Starbuck’s Dunkin case.
Sadly, the average employee with a non-compete does not have this kind of leverage. Their case may drag on for years in state court, while they try to defend their professional reputation and rights.
You need to be more prepared. You need to know your rights, and how your future employer plans on handling the situation should you get sued.