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Appeals court overturns summary judgment in noncompete case

Las Vegas companies often seek to protect themselves by requiring companies to sign a noncompete agreement. These agreements generally act as a promise that an employee will not go to work for a competitor within a certain timeframe after leaving the company. When employees violate the terms of this type of contract, employers have the right to engage in litigation to enforce the agreement. If a lower court rules in favor of the employees, the employer can take the matter to an appellate court.

One company, named Stuart C. Irby Co., is seeking to enforce a noncompete agreement against three former employees. The dispute occurred after two of the employees, who were salespeople, resigned just a day after a branch manager also resigned. All three men went to work with a competitor. However, before the men came to work at Irby, they worked for a previous company who sold their employment contracts to Kirby.

The appeals court rejected the lower court’s ruling that the noncompete agreements, which came from the original company, had expired. The higher court found that there was sufficient evidence to show that a trial was needed. In addition to the noncompete agreement’s validity, there is also a question over whether the two salespeople were enticed to work for the competitor by the branch manager. If so, this would constitute a breach of fiduciary duty on the part of the employees.

Litigation involving noncompete agreements and breach of fiduciary duty can be complex to understand. When companies discover that an employee has violated the terms of a contract, they may find it of benefit to meet with a business litigation attorney. 

Source: Bloomberg BNA, “Company’s Noncompete Claims Revived on Appeal,” Jon Steingart, Aug. 7, 2015

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