As the economy improves, human resource professionals tell us that one of the challenges in the next several months will be retention of employees. If employees leave, companies need to be concerned about the confidential information the employees may disclose and use in competition with the company. In addition, companies need to be concerned about former employees and managers competing with the company and soliciting customers and other talented employees. On February 24, 2010, an Illinois Appellate Court issued a decision helpful to companies.
Citadel Investment Group, LLC (“Citadel”) provides financial services to its customers and hired two employees. Both employees signed a non-disclosure agreement in which the employees acknowledged that Citadel had “devoted considerable resources in developing its proprietary trade secrets.” The non-competition agreement provided that a “Competitive Activity” was “becom[ing] an employee of a Competitive Enterprise in a capacity I was in, or provide services that are similar [to those] I provided…when I was employed by Citadel.” Former employees were restricted from competing for up to 9 months. In addition, Citadel implemented “physical and electronic security measures” to protect its confidential information.
When two of the employees left Citadel and formed Teza Technologies LLC (“Teza”), Citadel filed for an injunction against Teza as well as the two former employees. The circuit court examined the language of the agreements as well as the actions of Citadel, the former employees and Teza. As a result, the circuit court entered an injunction. Teza appealed. The Appellate Court agreed with the issuance of the injunction. See Citadel Investment Group, LLC v. Teza Technologies LLC, Case No. 1-09-2828 (1st Dist. Ill. Feb. 24, 2010).
With an increasingly mobile workforce, companies should examine their non-competition and non-disclosure agreements to determine if the language will protect their confidential information and business. In addition, company executives should audit the procedures for protecting confidential information. The attorneys of the Firm’s Employment, Labor and Benefits Practice Group provide assistance by drafting these agreements, advising on steps to take to protect the company’s business and conducting audits to ensure that companies will prevail in suits to enforce these types of protective agreements.