February 19, 2013 Articles

When Does Preparation to Compete Become Unlawful Conduct?

Courts strike a balance between duty of loyalty and free enterprise.

By David L. Johnson and Junaid A. Odubeko

Under America’s free-enterprise system, workers frequently leave their employers to work for or start new competing ventures. Questions arise about whether an employee may be deemed to have breached the fiduciary duty of loyalty owed to his employer by taking preparatory measures, while still employed, to compete with his employer after termination. A related issue has to do with whether an employee or a former employee may be deemed to have breached a noncompetition covenant by taking such preparatory measures.

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