My Employee Is Setting Up A Competing Business, What Are My Options?

My Employee Is Setting Up A Competing Business, What Are My Options

As an employer, one of your worst nightmares might be discovering that a trusted employee is setting up a competing business while still working for you. This situation can lead to concerns about conflicts of interest, the misuse of confidential information, and potential harm to your business. 

In this blog, we’ll explore your options as an employer when faced with an employee who is launching a competing venture and discuss the steps you can take to protect your interests within the bounds of the law.

1. Review Employment Contracts and Agreements

Non-compete Agreements: Begin by reviewing any non-compete agreements that the employee may have signed as part of their employment contract. Non-compete agreements are legal contracts that restrict employees from engaging in competitive activities during or after their employment with your company. Ensure that these agreements are well-drafted and legally enforceable in your jurisdiction.

Confidentiality and Non-Disclosure Agreements: Examine confidentiality and non-disclosure agreements to confirm that the employee is bound by obligations to protect your company’s confidential information and trade secrets. These agreements are crucial for safeguarding sensitive data.

2. Consult Legal Counsel

If you suspect that your employee’s actions may be in violation of their contractual obligations, consult with an experienced employment attorney. They can provide you with legal advice specific to your situation and jurisdiction. An attorney can help you understand the enforceability of non-compete agreements and guide you on the best course of action.

3. Investigate and Gather Evidence

Before taking any legal action, gather evidence to support your case. Document instances where the employee accessed confidential information or used company resources for their competing business. Keep a record of relevant communications, actions, or any other evidence that raises concerns about their activities.

4. Consider Negotiation or Mediation

In some instances, it may be in your best interest to attempt to resolve the situation through negotiation or mediation. Engage in open and honest discussions with the employee about your concerns. They may be willing to take steps to mitigate conflicts of interest or reach a mutually agreeable solution.

5. Seek Injunctive Relief

If you believe that immediate action is necessary to prevent further harm to your business, you can seek injunctive relief through the courts. A Temporary Restraining Order (TRO) or preliminary injunction can temporarily prohibit the employee from engaging in competitive activities until a full legal proceeding can take place.

6. Pursue Damages

If the employee’s actions have caused harm to your business, you may consider pursuing damages through legal action. Damages may include compensation for lost business opportunities, decreased revenue, or damage to your company’s reputation.

7. Defend Against Possible Employee Claims

Be prepared for the possibility that the employee may defend themselves against any legal action. They may argue that restrictive covenants in their employment contract are unreasonable or that they did not violate any contractual terms.

8. Stay Informed About Local Laws

Keep in mind that employment laws, including the enforceability of non-compete agreements, can vary significantly between jurisdictions. Local laws and court decisions can impact the outcome of legal disputes related to competing businesses.

Discovering that an employee is setting up a competing business can be a complex and delicate situation. To navigate it effectively, it’s crucial to carefully review employment contracts, consult legal counsel, gather evidence, and consider the best course of action based on your specific circumstances and the legal landscape in your jurisdiction. 

By taking proactive measures and seeking legal advice when needed, you can protect your business’s interests and rights when faced with such a challenging scenario.

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