The violation of a restrictive covenant occurs under various circumstances. The two most common activities leading to litigation are (a) the solicitation of prohibited parties against the established time and/or geographical restrictions and (b) the unauthorized dissemination of confidential and proprietary information belonging to the employer.
Solicitation
Solicitation can be categorized into direct and indirect solicitation. Direct solicitation involves the employer alleging that a former employee actively pursued business against the non-compete covenant. The employer must provide sufficient evidence to prove that the former employee knowingly solicited business from prohibited parties.
Indirect solicitation occurs when a third party, alleged by the employer, engages in activities prohibited for the former employee. Here, the former employee might have induced the third party using information obtained during their employment. Success in such claims requires the employer to demonstrate the third party's actions reflect a "conscious disregard" of the agreement by the former employee. Breach may be established even if the employee did not personally violate its terms but influenced a third party to do so.
Claims around impermissible solicitation require the target to be a prohibited party as defined by the non-compete agreement. Protected parties in a restrictive covenant typically include current and past clients, with definitions often elaborated in the agreement to narrow the scope and enhance enforceability under Connecticut law.
A trickier classification pertains to "potential clients," who could theoretically be any participant in the economy, forming a broad prohibition upon termination. Enforceability hinges on how narrowly these clients are defined within the covenant. A restrictive covenant is more likely enforceable if the agreement provides a specific construction for this client class.
In service-based professions like law, medicine, finance, and other personal services, personal or private clients—those not affiliated with the employer—are generally not subjected to restrictive covenants. Courts favor excluding these clients from prohibited lists as their engagement does not result from a business connection with the employer.
Use of Confidential Information
Another alleged breach involves misusing confidential information that grants a new employer an economic edge, thus fostering unfair competition. Connecticut law prohibits former employees from exploiting trade secrets acquired during employment to benefit themselves or a rival, at the expense of their previous employer. To be deemed confidential, information must possess significant secrecy.
Trade Secrets
Connecticut statutes address the misappropriation of "trade secrets," which are employer property and cannot be used for personal gain. The term "trade secret" involves formulas, patterns, devices, or information compilations providing a competitive advantage. Enforceability depends on factors like outside knowledge, internal dissemination, secrecy measures, information value, development efforts, and ease of duplication.
Breach claims revolve around improper acquisition, disclosure, or usage of secrets, with "improper means" encompassing theft, inducement to breach secrecy, and espionage among other methods. Connecticut's statute of limitations restricts misappropriation actions to three years from when the misappropriation is discovered or should reasonably be discovered.
An implied duty exists to safeguard confidential information beyond employment termination, upheld by Connecticut courts, even without a non-compete agreement. However, pre-existing business-client relationships are not protected by this implied duty.
Merely retaining confidential information could constitute a breach without actual exploitation evidenced. In TyMetrix, Inc. v. Szymonik, the court ruled possession of sensitive information violated employment agreement terms despite the former employee's intention for retention.
Non-compete agreements may include non-disclosure clauses, sometimes separated into distinct agreements. Connecticut courts prioritize enforcing nondisclosure over non-compete agreements as protecting proprietary information is clearer than restricting trade or employment. Unlike non-competes, non-disclosure agreements do not necessitate time and geographical limitations, allowing courts to apply a standard or modified "reasonableness" review.
Contact Us
If you have any questions about breaching a non-compete agreement in Connecticut, or wish to consult an attorney regarding a legal matter, please contact Joseph C. Maya and the attorneys at Maya Murphy, P.C. at (203) 221-3100 or Jmaya@mayalaw.com to arrange a free initial consultation.
