Two recent decisions in the news highlight the risks that may accompany hiring an employee subject to a potentially enforceable non-competition or non-solicitation agreement. 
The most recent decision involves an injunction enforcing the non-compete of a recently-hired employee even though the new employer, Avaya, took, in the district court’s own words,”scrupulous steps” to protect the former employer’s trade secrets after the hire. (Many thanks to the Massachusetts Non-Compete Blog for its fine post on this decision). On June 2, 2011, in Aspect Software, Inc. v. Barnett, Civil Action O. 11-10754-DJC, the United States District Court Court for the District of Massachusetts detailed the efforts of Avaya and the former employee, Gary Barnett, took to protect the plaintiff Aspect Software’s trade secrets before Barnett started his new job:
Barnett turned off his Aspect-issued Blackberry immediately after tendering his resignation, left his laptop computer in his office, and boxed all Aspect property in his home and made arrangements for a representative from Aspect to retrieve the boxes. Avaya included language in its employment offer to Barnett that specifically forbade him from using any Aspect trade secrets in the course of his employment with Avaya and, separately, incorporated by reference Barnett’s Agreement with Aspect. Avaya and Barnett subsequently entered into an “Employee Agreement Regarding Intellectual Property” that included similar protections.
In addition, Avaya’s Senior VP and President of Global Communication Solutions sent Barnett a detailed e-mail that provided the following ground rules:
  1. Do not retain any documents or information relating to Aspect’s business, in any form, that you obtained in your role as an Aspect employee.
  2. Do not disclose any document or information relating to Aspect’s business to anyone at Avaya and do not use such documents or information in your employment with Avaya.
  3. If Aspect comes up in any discussion or meeting that you are attending in your role as an Avaya employee, you should not provide any input.
  4. If, in the course of your employment with Avaya, you are asked for information relating to Aspect’s business, you must refrain from providing the information.
  5. Until April 19, 2012, do not have any communications with any Aspect employee about leaving his or her employment with Aspect.
  6. Until April 19, 2012, do not play any role in hiring anyone who was employed with Aspect in the 180 days prior to your involvement in the hiring process.
  7. Until April 19, 2012, do not have any communications with any Aspect customer, supplier, licensee, licensor or business relation about doing business with Aspect or Avaya.
  8. Until April 19, 2012, do not make any negative statements about Aspect to any Aspect customer, supplier, licensee, licensor or business relation.
Despite these steps and despite the court’s expression of appreciation for the efforts to “protect the integrity of Aspect’s trade secrets,” the district court nevertheless concluded that even if “wholly successful,” these steps would only reduce the harm flowing from the breach of the agreement and not the breach itself. In addition, the district court noted that these steps lacked the force of law and were merely contractual and voluntary in nature (which begs the question of whether an agreed order was ever addressed). Applying the inevitable disclosure doctrine, the district court concluded that an employee, no matter how conscientious, might ultimately use the forbidden information and as a result, the court enforced the non-compete. However, it is worth noting that the court required Aspect to post a $500,000 bond, a substantial condition for a case involving only one employee.
The other case involves a $7.86 million jury verdict against Houston’s University General Hospital and its affiliated companies Ascension Physician Solutions and Luxxus Health Systems for intentionally interfering with the contracts of a competitor, Prexus Health. University General Hospital had hired several senior executives who were subject to non-compete and confidentiality agreements with Prexus Health. The Harris County, Texas jury found that University General Hospital’s leadership wrongfully terminated a series of contractual agreements with Prexus, agreements which covered management and administrative services at University General’s 72-bed specialized hospital. The jury also found that Luxxus interfered with confidentiality and non-compete agreements by hiring the former Prexus executives and employees to perform the same services through companies controlled by University General executives.
How does a company avoid these potential issues? First, by debriefing any prospective employee about the existence of a non-compete, non-solicitation or non-disclosure agreement, an employer can avoid hiring a prospective employee altogether if it foresees a potential issue. The problem, however, with this approach is that in many industries that might substantially reduce, if not eliminate, the talent pool available to that employer. Second, in the event that a company has concerns about the scope, duration or enforceability of a former employee’s agreement (for example, few, if any, courts would enforce a worldwide non-compete), it should take steps similar to what Avaya did, as detailed above, to minimize any improper disclosures or contacts. Although the district court granted an injunction in that case, the district court’s language commending Avaya and Barnett suggests that it was conflicted about issuing the injunction but felt duty-bound to do so. The order directing a substantial bond ($500,000), however, speaks volumes about what the court thought was appropriate and suggests that the court used its discretion to shape a resolution or result more in line with the perceived equities of that case. Third, by taking the steps that Avaya did, a party should be able to avoid the situation that befell University General Hospital; if the new employee (and by extension, the new employer) is not using a former employer’s trade secrets or contacting former customers, the risk of a multi-million dollar verdict should be eliminated.