Non-Competes and Office Romances

Over the holiday, the Court of Appeals issued a couple of employment-related decisions regarding situations that often come up.

  1. Non-Compete Agreements/Competition with Former Employer

In Curry’s Transportation Services, Inc. v. Dotson et al., the Court of Appeals addressed the enforceability of a non-compete and competition with a former employee.  Since I want to address two cases in this post, I’m going to give the cliff notes rather than dissect the whole case.

  •  Non-compete agreements are unenforceable if they are unnecessary to protect the business interest.  CTS’s information did not require protection.  Its customers were not confidential.  It priced its service the exact same way all trucking companies price its service—rates were generally standardized across the industry.  Business in the trucking industry is not dependent upon personal contacts and relationships or confidential information.  CTS did not require most of its drivers to sign non-competes and/or confidentiality clauses.  All these facts together led the court to find that the non-compete was unenforceable.  Again, it was all the facts that led to the conclusion.  Simply requiring employees to sign a non-compete will not make it enforceable.  There must be a legitimate business interest that needs to be protected.
  • Preparation to form a competing business is generally lawful unless an individualized harm to the former business beyond additional competition results from the preparation. 

       2.   The Office Romance

 In Roche v. Davenport Cleaners et al., the facts circled around a volatile romantic relationship between two co-workers that led to the termination of the female co-worker.  Both employees engaged in derogatory speech towards each other, finally resulting in a physical altercation initiated by the female co-worker.  After termination, the female co-worker filed a sexual harassment and retaliation suit against the employer.  The employer was found not liable because the court determined that the female co-worker engaged in the name-calling and harassment and that the conduct was based on the relationship between the parties, not because the plaintiff was a female.  Let’s see what steps can be taken to prevent this expensive lawsuit.

  •  Determine if you will prohibit or limit romantic relationships between co-workers.  Will you prohibit all romantic relationships?  Will you transfer those involved in romantic relationships to different departments?  Once you’ve determined if a policy is necessary, put it in writing, distribute it to your employees and train your employees.
  • Respond appropriately to harassment/misconduct in the workplace.  Davenport Cleaners knew what was happening in the workplace.  It was aware of the name-calling between the two individuals.  From the facts presented in this case, it appears that Davenport Cleaners did little to prevent/rectify the situation.  When complaints are made (even if the employee does not “want to get the harasser in trouble”) take action.  Investigate and discipline when necessary and as appropriate.  Don’t let the problems get out of hand.

Happy New Year!

So you want to start your own business . . .

You've been working at ABC Co. for some time now. You have gained experience and knowledge during your employment, but you've caught the entrepreneurial bug. You want to start your own business. During your employment you have developed solid relationships with ABC Co. clients. You're positive these clients would follow you if you left ABC Co.  Before you do anything ask yourself the following questions:

1.      Did you sign a non-compete with ABC Co.? Reasonable non-compete agreements are enforceable in Iowa. If you signed a non-compete agreement before or during your employment with ABC Co., it may be enforceable and you will want to abide by the terms of the agreement. If you have questions about the agreement, contact your attorney.

2.      Do you still work for ABC Co.? If you are currently employed with ABC Co. fight the urge to solicit ABC Co. clients and/or employees. According to Iowa law employees have a duty of loyalty to their employers. Soliciting clients and/or other employees while employed violates that duty. Even an innocent conversation with a client: "Hey, I'm thinking about starting my own business, what do you think?" may be considered solicitation. It may be difficult to not ask because clients are important to the success of your new venture. But don't do it.

3.      Are you cleaning out your old office/workspace? If you have terminated  your employment (or are just about to) and are in the process of cleaning out your workspace, including your computer refrain from taking with you ABC Co. information or materials that may be unique to ABC Co.. This information or material might be considered confidential or a trade secret. Leave it there.

4.      Have you terminated your employment with ABC Co.? Once your employment relationship with ABC Co. has been terminated you are free to compete  with ABC Co.(as long as there is no agreement otherwise). You are entitled to use general information concerning the business, including the names of clients retained in your memory. Good luck.

photo on flickr by bludgeone86