Howard Levitt: Do departing employees owe anything to their employers once they leave?

financialpost.com:

By Howard Levitt and Peter Carey

In past musings, we have often commented on the remedies employees have against their employers, particularly upon leaving their jobs. Employers also have rights when employees depart, even when those employees are fired. The problem is employers frequently overestimate the obligations owed to them by departing employees, when only four have been deemed to be enforceable:

1. If the employee has a contract with an enforceable non-competition clause, that contract may remain effective.
2. The employee cannot have competed with their former employer while still under their employment.
3. If the departing employee was a fiduciary of the employer, they may still owe some obligations to the employer.
4. An employee can never misuse confidential information belonging to their employer, even after they depart.

Let’s look at these obligations individually:

Most employment contracts have non-competition clauses that are wildly overreaching. Non-competes are regarded as restraints of trade and are prima facie unenforceable. Courts do not like enforcing them, except when the non-compete clause is commercially reasonable to protect the interests of the employer, and even then, the protections must be temporally and geographically restrained. Generally, in employment contracts, less is more. If you have a non-compete that effectively prevents your employee from working anywhere in the country for five years, it is unenforceable and not worth the paper it is written on. In our combined 90 years of experience, we have only seen perhaps a dozen non-competes enforced by the courts, and they were enforceable precisely because they were modest in restricting the activity of the departing employee.

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