Employers who want to hire from a competitor frequently have to contend with the potential fallout from the new employee’s non-compete.  Any misstep in that hiring process can easily lead to costly and time-consuming litigation.  If an employer wants to go forward with that hire but try to minimize its risk of litigation, one popular approach is to implement affirmative steps safeguarding the prior employer’s trade secrets and avoiding solicitation of the former employer’s customers (see my previous posts on how that strategy has been used successfully by Hewlett Packard and Google in other cases).  However, there is another more unconventional approach:  paying an employee to sit out the duration of her non-compete (what is known as a “garden leave”) and indemnifying that employee from a future lawsuit so long as she abides by her non-compete.  This approach was successfully implemented in a recent dispute in the highly competitive and apparently lucrative e-discovery market.  The case, Document Technologies, Inc. v. LDiscovery, LLC, 17-2659-cv (2nd Circuit  April 24, 2018), offers a nice case study on the use of indemnity provisions to defuse allegations of breach and provides a roadmap for employers who may have the pocket book to support this approach.
Continue Reading A Well-Drafted Indemnity And Garden Leave Thwart A Non-Compete In New York