Can You Compete with Your Boss?
You decide to own your own business.
But, you are still employed.
Duties in your current job include finding businesses to buy.
You find one.
You buy it for yourself.
It’s in the same industry as your current employment.
Boss sues you.
These facts were heard in a jury trial this week. We represented the employee…and prevailed. Generally, you cannot compete with your boss. However, there are lessons to be learned–for both employer and employee–in our successful defense of our client.
Following is a synopsis of the employer’s legal claims and our arguments to defeat each of them.
Breach of Noncompetition Agreement
We convinced opposing counsel to withdraw the breach of noncompetition agreement claim before submitting it to the jury for consideration. Oregon has strict rules for noncompetition agreements to be enforced. For example, notice that a noncompetition agreement is required must be given two weeks before employment, or the agreement must be signed as part of a promotion. Also, the employee’s compensation must exceed the median income of a four-person family.
Breach of Fiduciary Duty
An employee owes a fiduciary duty of loyalty to his employer. Competing with one’s own boss usually breaches that duty. We successfully sidestepped this claim by arguing that the employee was merely taking steps to compete. Courts have held that an employee may compete with his boss after employment and, during employment, may take steps to compete.
Intentional Interference with Prospective Economic Relations
For this claim, the employer had to show that our client interfered with a prospective business opportunity through improper means or for an improper purpose. The employer argued that our client undercut him. He claimed that our client bought the business without his knowledge or consent after learning of his offer. The employer testified that he already had a “handshake” deal. We convinced the jury that the employer was only willing to make a low-bid offer and that our client negotiated after their potential deal was dead.
Unjust enrichment occurs when a person confers a benefit, the recipient is aware of the benefit, and it would be unjust to allow the recipient to retain the benefit. The employer argued that he conferred a benefit when the employee learned of the business opportunity through his employment and that it would be unjust to allow the employee to keep the business. Unjust enrichment is considered an equitable remedy, basically meaning that it taps into that gut feeling of whether a person’s conduct is right or wrong. Most likely, the jury was influenced by the inconsistencies we exposed in the employer’s testimony as well as his defensive and aggressive behavior we prompted on the stand.
As with all jury trials, the outcome is never certain. Every trial ends with that moment of silence when the jury reenters the courtroom with its verdict. The lead juror is called forward and hands the verdict form to the judge. Finally, the judge reads aloud a decision having significant ramifications for the anxiously awaiting parties. While good lawyering helps, knowing possible claims and defenses before a dispute even begins can directly influence the result.