Cease & Desist Letter Re Noncompete Results in Firing of New Employee

1/1/2016
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A January 21, 2014 decision by a Federal judge in Michigan in the case of Bonds v. Phillips Electronic North America has generated a great deal of discussion by employment lawyers, as the fact scenario in that case occurs with a great deal of frequency, and therefore, companies (and their attorneys) are looking for the best way to handle these situations, without incurring undue risk.

In Bonds, the plaintiff left Phillips to work for a competitor, and upon learning of Bonds's destination, Phillips wrote to Bonds, formally reminding him of his contractual obligations to Phillips under their noncompete agreement, and threatened litigation if he refused to abide by the noncompete.

But here's the most important part:

Phillips carbon copied Bonds's new employer on the letter.

What happened next doesn't always occur, but is certainly not unforeseeable either. Bonds's new employer decided that he wasn't worth the headache, and promptly fired him.

The court dismissed Bonds's lawsuit, and found that Phillips' letter did not constitute tortious interference with Bonds's new employment contract on a few different grounds. Here is some of the most pertinent language from the holding:

"[Defendant]'s letter also contains strong, assertive language, but does not call for Plaintiff’s discharge and Plaintiff has no evidence that anyone from Defendant specifically requested his discharge.

"[Defendant]’s letter raises concerns regarding Plaintiff’s obligations under his confidentiality agreements, and more specifically, “the potential disclosure of Philips (sic) confidential information.” These concerns are of course magnified by the fact that Defendant did not disclose his concurrent employment with Barrington to Defendant. Therefore, “[Philips] appears to have been acting solely to protect . . . [its] confidential information,” and Plaintiff has put forth no evidence of an improper motive of interference. Id. at 14; see also Hollings v. TransactTools, Inc., 128 F. App’x 820, 821-22 (2d Cir. 2005) (no tortious interference where former employer sent letter to plaintiff’s new employer “expressing concerns” regarding the possibility of disclosure of former employer’s “proprietary confidential and trade secret information” and requesting assurances from new employer that plaintiff not work on competitive products or solicit its employees, which caused the new employer to terminate the plaintiff’s employment)."

There are several take-aways from this story, both from the perspective of the former employer, as well as the employee.

Writing a cease and desist letter can sometimes prove just as effective in protecting a company's confidential and intellectual property as full-blown litigation, but it's a lot less time-consuming and less expensive. To be sure, there are circumstances where proceeding immediately to litigation is the better option, but the point to be understood here is that letter writing can be, and often is, a viable option
That said, if you are going to write that letter, you should make absolutely sure that you are seeking to protect a legitimate business interest. If not, you risk being held liable for tortious interference.
If you are looking to change jobs and are bound by a noncompete, you are being foolish if you don't disclose it to your new prospective employer

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