Holly Katko – guest blog post:
Brent Ohlmann from the Law Office of Brent E. Ohlmann, PC
Innovate – Don’t Borrow
Starting a new business often means changing hats from employee to owner. If your new business is similar to, or competes with, your former employer, be careful to start out with a solid legal foundation by not borrowing from your former employer.
A post-employment restrictive covenant (usually referred to as a “non-compete”) is reasonable and enforceable if it: (1) is no greater than required to protect a legitimate business interest of the employer; (2) does not impose undue hardship on the employee; and (3) does not injure the public. The Illinois Supreme Court ruled this month that “whether a legitimate business interest exists is based on the totality of the facts and circumstances of the individual case” but factors to consider include how long-term customer relationships are, whether the employee learned the employer’s confidential information, how long the restrictions last and what geographic area they cover. No factor is more important than any other.
Even if you never signed a non-compete agreement, as an employee, you have a fiduciary duty to your employer not to disclose confidential information that you acquired from your employer. This sort of information includes client lists, marketing strategies, financial details, methodologies, quality control measures and even personnel issues. All the things that are not public and could hurt the business if they were know by a competitor. Your fiduciary duty to keep your former employer’s confidential information secret continues even after your employment ends (and goes as long as the information is confidential).
You need to start your new business from scratch, using general industry knowledge and returning to customer relationships you had before you worked for your former-employer but without using confidential information from your former employer.