Enforcing restictive covenants against employee and new employer
After reading the employee stealing former employers customers article I ran into a question that I don't have the answer to. The majority of the folks that we hire are what I consider judgment proof they have no real assets and nothing to sue for. Aside from having a really big bark there's nothing to really bite. How are we protected by the Standard Employment Agreement in this situation?
While my understanding of legal matters is limited I have often heard the phrase "there's a difference between getting a judgment and getting results". Now I'm assuming that we would be able to file an injunction or a Cease and the Desist. I'm assuming your contract has a liquidated damages Clause but if they have no assets how enforceable is it? Is the new employer on the hook as well?
The Security Guy
You are right on a few issues. Getting the judgment is only half the problem. Collecting is the harder part unless you are suing a defendant with "deep pockets". Suing a consumer or "natural person", like an employee, is tough because collecting is difficult. You might wonder why, thinking that the fellow has a job, a car, house, retirement plan, fancy watch or seems to have enough to vacation often. Many assets and property owned by a person is exempt from "execution", which means you can't attach it and take it away from the person you have the judgment against. If a person decides to seek bankruptcy relief there are federal or state exemptions that permit the person to retain their home, car, retirement plan, jewelry and even money. That's not to suggest that every person will have assets and property limited to exemptions, but I don't think alarm techs or most of your employees are going to be high earners able to pay a substantial judgment you obtain against them.
All that doesn't mean you shouldn't bother with an Employment Agreement that has restrictive provisions. First of all the Employment Agreement will identify what property you consider to be proprietary and confidential, such as customer information. The Employment Agreement will require return of that property when employment ends, and also restrict certain activity after employment. These written restrictions will tend to "chill" violation because the employee doesn't want to get sued. The Employment Agreement also has provisions for injunctive relief, since stopping the violation may be more effective than seeking monetary damages after the damage is done.
A new employer hasn't signed any agreement with you restricting employing the former employee or accepting the "fruits" of that employee's violation of the restrictive provisions. However, putting that new employer on notice of the employees restrictions may put the new employer on notice that the employee is acting in bad faith, perhaps in violation of law by using stolen records and property, now on behalf of the new employer, and that the new employer will be sued if it promotes, encourages or accepts the benefits of the wrongful conduct.
These lawsuits are costly and should not be considered unless the potential monetary damages are significant or likely to be significant.
Note that some states may have restrictions on employment agreements with restrictive covenants and all states have judicial decisions that restrict the enforcement of these agreements to what the courts deem reasonable in that jurisdiction.