Confidentiality and Non-Solicitation Agreements

At the outset of new employment, an employer requires that new employees sign a series of documents. Many of these are required government forms. However, some employers who are in highly competitive industries present their new hires with confidentiality and/or non-solicitation agreements. Generally, a confidentiality agreement precludes an employee from sharing what he or she learned on the job after departing (e.g. trade secrets, formulations, software programs, etc.). A non-solicitation agreement on the other hand, generally precludes a departed employee from seeking out his or her former employer's customers or current employees. Both documents are frequently litigated.
The recent appellate case of Healthcare Horizons, Inc. v. James Brooks is illustrative of such litigation. Healthcare Horizons was the employer of two former employees, James Brooks and John Graham. Both Brooks and Graham signed similar confidentiality and non-solicitation agreements, but the documents varied in one material way – the Graham agreements had a binding arbitration clause over all claims and the Brooks agreements had a binding arbitration clause over only some claims. After Graham and Brooks left Healthcare Horizons, they worked for a new employee, which was a direct competitor.
Healthcare Horizons sued only Brooks for violation of the confidentiality and non-solicitation agreements, and included claims which removed the lawsuit from the arbitration requirement. For reasons unknown, Brooks preferred arbitration as opposed to litigation. Brooks attempted to invoke the arbitration clause that Graham signed, not Brooks. Both the trial court and the court of appeals found that Brooks could not rely on the Graham agreements to compel arbitration. Instead, the Brooks lawsuit would proceed in court.
Of note for employers is remembering that one size doesn't always fit all and the perpetual reusing of the same set of documents over and over without reexamination of whether the documents still fit, is ill advised. Employees, on the other hand, should be cognizant of understanding what they agree to when commencing new employment and attempt to negotiate out undesired terms. Competent counsel can help in both regards.