Preparing to compete . . . while still employed. Is it legal?

January 8, 2013

So long as certain guidelines are followed, at-will employees who are not under any contractual restrictions during employment may generally prepare to compete with their employer by, for example, registering a new business entity with the Secretary of State, opening bank accounts for their new business, obtaining a business license, obtaining a phone number, obtaining tax identification numbers and looking at office space.  Employees do owe their current employer a “duty of loyalty” which the courts often limit to only those employees who can bind their employer for certain obligations, or otherwise occupy a fiduciary role, but some courts apply this across the board to all employees, so it’s best to keep in mind the following guidelines:

1) Work a full day’s work for your employer and keep your preparing to compete activities limited to nights, weekends, holidays or other non-work time.

2) Never use your employer’s property or equipment to prepare to compete.  This includes your work email account, your employer’s software, office supplies and proprietary information.  All of this is property of the employer, for use in furtherance of its business, not your new business.

3) Do not remove, forward or copy any property of your employer.  Even employees who are under no contractual restrictions are subject to Georgia’s Trade Secrets Act, and the simple act of forwarding to your Gmail or other personal account files you use at work can get you in hot water later if a company decides to assert a claim under this Act.  And, while the courts do require companies to prove that a trade secret existed, the company took reasonable efforts to maintain its secrecy and the secret was wrongfully taken by a former employee, lawsuits under this Act are expensive to litigate and can hamstring your post-employment activities should your former employer succeed in obtaining a TRO while the case is underway.

4) Do not solicit your employer’s customers or prospects for your new company, or for anyone other than your employer.  Once you leave, if you are not a corporate officer and are under no post-employment restrictions (such as a non-compete, customer non-solicitation, employee non-solicitation or non-disclosure of confidential information provision), you can solicit your former employer’s customers and prospects.

5) Do not do anything else that directly competes with your employer while you are employed, including while you work out your notice period or are still being paid by your employer.

6)  Don’t do anything that would constitute “computer theft” or “computer trespass” under Georgia’s Computer Systems Protection Act.  This includes wiping hard drives or otherwise manipulating data and files without your employer’s authorization.  Some creative lawyers even use this Act to go after employees who download work files to a USB drive or forward them to a personal email account, arguing that these acts exceed the company’s authorization.

7) Keep excellent documentation of your pre-departure activities, in case you need to rely on it later in court or to prepare a response to a cease and desist letter.