Leveling The Playing Field: Recognizing Unfair Competition
Sometimes, employers and employees part ways. Such is a part of business. But occasionally, you may find that your ex-employees are less scrupulous than you thought. They may poach employees, steal trade secrets, or open a directly competing business. These practices are referred to as unfair competition. If any of these types of things have happened to you, you may have a case against your ex-employees.
Unfair Competition in California
In California, unfair competition is defined as any “unfair, unlawful or fraudulent business act” or practice, and any “unfair, deceptive or untrue” advertising. However, California courts have struggled so far in defining what exactly constitutes “unfair” and “fraudulent.” (“Unlawful,” on the other hand, is fairly self-explanatory,)
The courts have decided that reviewing the “fairness” of a business practice does not open the door to reviewing the fairness of an underlying contract - the two are not the same thing. Beyond that, there is not much specific jurisprudence as to what constitutes “unfair.”
“Fraudulent” is equally nebulous. The standard of criminal fraud does not have to be met for a business practice to be declared fraudulent or deceptive.
Two common causes of unfair competition claims are breach of a non-disclosure agreement (NDA) and theft of trade secrets.
While non-compete agreements (agreements prohibiting a departing employee from working in a specific industry for a defined period of time) are generally not enforceable in California, non-disclosure agreements (“NDA”) are, and breach of an NDA is definitely grounds to try and bring suit. Breach of an NDA means that information you consider privileged may have been used in an unacceptable manner.
Another leading cause of unfair competition claims is stolen trade secrets, referred to in the California Codes as misappropriation. A trade secret can be anything from the inner workings of your company’s products to your client lists. There can be both civil and criminal penalties for anyone guilty of misappropriation. California law is somewhat unique in that it states that the employer owns trade secrets created by an employee, so you may have wider leeway in alleging unfair practices than companies in other states.
If you decide to bring suit for unfair competition, you cannot—by law in California—receive any money damages for that claim. You can receive restitution (any amounts that you can prove your competitor unfairly gained as a result of the unfair competition) but you cannot receive punitive damages on top of that. You may only receive restitution and possibly injunctive relief (a court order making your competitor stop its unacceptable practices).
Contact a Business Law Attorney Immediately
If you believe you are the victim of unfair competition, please do not hesitate to contact Garcia & Gurney, ALC today. We can help redress the wrongs done to you, and get your business back on the right path.