Business torts are lawsuits involving either the civil misconduct of a business or civil misconduct committed against a business. Many business torts involve breaches of contract elements such as non-compete agreements, disparagement and confidentiality clauses, and trade secret protection agreements.
Common Types of Business Torts
Breach of non-compete clause
Many companies include strict non-compete clauses in their employee contracts. This practice is increasingly common, and it can create stressful issues for businesses and their former employees. Non-compete clauses, also known as CNCs (covenants not to compete), are designed to protect companies’ trade secrets, innovations, and other proprietary information. Non-compete clauses usually prohibit the following actions:
- Accepting a job offer from a known competitor within a certain time window after leaving the original employer
- Using information, resources or methodology gleaned from the original employer to start a business that could pose competition to it
- Establishing a competing business, or working for one, within a certain distance of the original employer’s location
Although there are very obvious instances when a former employee starts a business that clearly competes against the original employer, most business torts involving CNCs are far more nuanced. From a court’s perspective, it may not be considered fair for employers to significantly hinder their employees’ professional mobility through non-compete clauses.
Among the factors that determine whether a CNC breach warrants civil penalties are:
- The intent of the party who committed the breach
- The alternative employment options reasonably available to an employee who worked for a competitor within the prohibited time period
- Whether the original employer can demonstrate that the trade secrets, methodology or information disclosed to outside parties was, in fact, original and proprietary
Non-disparagement clauses are commonly included in new employee contracts and severance agreements. These clauses prohibit employees from publicly maligning or discrediting their current or former employer. Often, but not always, they specify a time period in which the agreement is binding. It is possible for non-disparagement clauses to be indefinitely legally binding.
One of the common outcomes of such agreements can be found in books, films and other materials based on real-life businesses. The creators of these materials may fictionalize certain details about their experience working at a business in order to avoid breaching non-disparagement clauses or inciting a libel suit. The materials often include a disclaimer explaining that any resemblance to actual people or events is merely a coincidence.
“Bringing a business tort claim allows you to recover damages incurred due to wrongful conduct such as fraud, unfair competition, breaches of fiduciary duty, or interference with a business relationship.” – Attorney William Lewis
Though employer-employee non-disparagement clauses are the most prevalent type, certain businesses have demanded such requirements of their customers. These requirements are rarely found to be legally viable, but no specific legislation has been passed to definitively eliminate them. As such, in 2015, A Consumer Review Freedom Act was introduced to prevent consumers from facing lawsuits for leaving negative reviews about businesses.
Free speech is at the crux of many business torts related to non-disparagement, as is the very definition of disparagement. If an employee is simply recounting publically available, non-confidential information about a former employer that happens not to be flattering, it may be difficult for the employer to classify the action as disparagement.
If, on the other hand, the employee takes steps to introduce new and clearly damaging information to the public, the media or a competing business, that person may be more clearly in violation of the non-disparagement clause.
These agreements can also be mutual, meaning that the employer is likewise prohibited from defaming the employee in any way. It is extremely important for employees, whether they are newly entering a company or leaving it, to review non-disparagement clauses with care and to seek expert review whenever possible. If the terms of a non-disparagement clause are unreasonable, excessive or unlawful, you will want to ensure that you catch those details before signing the agreement.
Why Seek Attorney Representation?
Regardless of how detailed or extensive the language in a contract may be, conflicts can always arise that cause damage and losses to businesses and individuals. Excellent attorney representation is equally crucial in arbitrations and trials. This is why, at the Business Trial Group, we work on a contingency-fee model regardless of how the case is ultimately resolved.
Our contingency-fee structure allows us to take the time we need to review any existing contracts that pertain to your case, gather expert witnesses to support you and collect any other information that will make sure you get the results you deserve.
If we don’t lead your case to a successful resolution, you won’t be charged. With us, there are no hourly fees whatsoever. A contingency fee is a percentage of any judgment or settlement from your case.
To find out whether you may be eligible to file a claim, contact us confidentially via our no-fee, no-obligation case review form.