Magazine article Workforce Management

Litigation over Noncompete Pacts on Rise

Magazine article Workforce Management

Litigation over Noncompete Pacts on Rise

Article excerpt

TRADE SECRETS

As many executives are taking extra measures to protect their compa- nies during the economic down- turn, employment attorneys are seeing an increase in litigation around trade se- crets. Specifically, employers are being more aggressive about suing former employees regarding noncompete agreements, attorneys say.

"In these economic times, companies are taking precautions to protect their business," says Marguerite Walsh, a shareholder at employment law firm Littler Mendelson. "These lawsuits serve two purposes: One is to salvage a situation, but also it's to send a message to people at the company."

In the past, the majority of litigation around noncompetes seen by Walsh has involved key executives or salespeople at the firms. But now, Walsh is seeing more litigation involving junior and midlevel employees.

Even in these tough economic times, top-performing employees can be offered positions elsewhere, and companies want to be prepared for that, she says.

"Solid performers may be in a situation where their companies aren't doing well, but they can go across the street to a more stable company," Walsh says.

And with mass layoffs in financial services and other sectors, attorneys expect noncompete litigation to continue rising. Noncompete agreements can cover terminated employees.

"It's going to be very interesting to see what happens to these agreements in the financial services industry over the next couple of months," says David Landow, who is a partner at WolfBlock and has seen an uptick in trade secret litigation in the past few months. …

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