Everyone has the right to form new businesses and enter the marketplace, including your previous employees. But problems arise if these people violate non-compete agreements or use confidential data, trade secrets, or other restricted information to compete with your business. In that case, the competition may be unfair and unlawful, and you may have the right to take legal action against them.
What Is Unfair Competition in Business?
Unfair competition is defined as acts that “cause economic injury to a business through a deceptive or wrongful business practice.” This broad definition includes many potential torts, such as false advertising and trade libel, which can be performed by any competing business. However, the most damaging form of unfair competition often results from the actions of former employees.
After an employee leaves your company, they still have the knowledge and skills they learned while working there. These people may have confidential information that provides them an unfair advantage in competing against your company. If they found their own business or start working for a competitor, they could use this knowledge to provide a competitive edge for their new organization.
This may or may not be unlawful, depending on the situation. In Florida, it is almost always considered unlawful for an employee to use or disclose trade secrets, regardless of whether there is a non-compete or confidentiality agreement in place.
Trade secrets are defined in Florida Statutes section 688.002(4) as information that “derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” This can include things like recipes, patterns, programs, methods, and techniques used by a company to stand apart from other businesses.
The use of other confidential information may not automatically be considered unfair competition. However, violating valid non-compete agreements is. Suppose your employee has knowingly signed a non-compete agreement that is “reasonably necessary to protect the legitimate business interest” of your organization. In that case, they may not violate that agreement in the course of their own career.
Examples of Unfair Business Competition
Unfair competition can take many forms. One example would be a chef using their former employer’s secret recipe for their signature dish at their new restaurant. The recipe could reasonably be considered a trade secret, so using it would be unfair. Similarly, a software engineer using their knowledge of a protected system to create their own software would violate their former employer’s trade secrets.
Non-compete agreements broaden what actions may be considered unfair. As long as it is necessary to reasonably protect a legitimate business interest, a Florida non-compete contract may bar the subject from:
- Making use of confidential information or intellectual property that is not considered a trade secret
- Calling on existing client relationships or goodwill
- Operating in specific geographic areas or industries
- Using specific “extraordinary” training or skills learned at the business.
So long as the non-compete contract is considered legitimate and legally binding, you can pursue legal action against former employees who violate it and cause you to lose profits.
How to Prove Unfair Competition by Employees
If you believe that a former employee is unfairly competing against your business and causing you to lose money, you must prove your claim in court. This requires you to establish several factors:
- That the person had the duty to protect trade secrets or was bound by a legitimate non-compete agreement.
- That the person knowingly used trade secrets or took actions that violated the non-compete contract.
This is necessary to receive a court injunction against your former employee and require them to stop their unlawful activities. In addition, Florida provides the following instructions to contract and business jurors in these claims:
“To be entitled to recover lost profits, [the claimant] must prove both of the following:
- [The d]efendant’s actions caused [the claimant] to lose profits; and
- [The claimant can establish the amount of […] lost profits with reasonable certainty.”
In short, you will need to prove that their actions were unlawful, purposeful, and harmed your business to recover damages. This can be a complex task, so it is in the best interest of your company to work with experienced commercial and intellectual property attorneys.At EPGD Business Law, our proven unfair business competition associates are prepared to assist your organization with trade secrets, trademarks, and contract violation claims. Learn more about how we can use our knowledge and skill to support your business by scheduling your consultation today.
