Judge Rakoff Provides Guidance on What Constitutes Permissible Preparatory Activities Before an Employee Resigns

Sep 20, 2017 | Blog
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On July 6, 2017, in a case of which both employers and employees and should take note, Judge Jed S. Rakoff of the Southern District of New York, in the matter of In re. Document Technologies Litigation, 17-CV-2405, 17-CV-3433, 17-CV-3917, refused to grant Document Technologies Inc.’s (“DTI”) motion for a preliminary injunction against four former high level sales personnel and their prospective employer, a competitor.  In his 30-page decision, no aspect of DTI’s post-employment restrictions was spared the court’s analysis.  The decision provides perhaps the latest recitation under New York law of the type of preparatory activities that employees may engage in while employed without violating the terms of their non-competition.  The court made clear, without more egregious misconduct, employees’ decision to “market themselves as a ‘package deal’” is not in and of itself a violation of their agreement.  The court went so far as to say, “if DTI desires to prevent its employees from coordinating their resignations, it is free to hire them pursuant to term employment agreements.”

Employees contemplating resigning individually, or with colleagues, to join a competitor are encouraged to speak with experienced counsel at the earliest possible.  Employers on the other hand should make sure their post-employment restrictions are consistent with New York law and they are taking steps to protect their confidential and proprietary information to prevent it from being misappropriated.   Should you have any questions regarding these issues please contact Scott G. Grubin, Philip S. Mortensen or James E. Heavey.