Q: I suspect that one of my employees is planning to leave my company and either go with another company which is in the same business as mine, or start his own business in competition with mine. What right does my company have to prevent the employee from doing this, and what can I do in the first instance to protect my company from the employee taking business and/or clients with him if he actually does leave?
A: The problem you describe is commonplace, particularly in companies where the type of business in which they engage, and the clients which they serve, are mobile and readily transferable. For example, stock brokerage firms and insurance brokerage firms often are confronted with employees who hop scotch from one company to another, typically as a result of being recruited by a competing company. In fact, these types of situations have generated a large amount of litigation and a wide body of case law on the subject.
To properly respond to the first part of the question requires a brief examination of certain foundation legal principles. Generally, in New York, Courts favor the right of a person to freely pursue employment and economic opportunities. On the other hand, Judges will enjoin an employee from going into “competition” with his former employer where the totality of the circumstances would make it unfair or inequitable for the employee to do so. In balancing these divergent interests, courts will carefully scrutinize a number of factors.