As readers of the Trade Secrets & Noncompete Blog are aware, companies routinely seek to enforce their employment agreements with departing employees in order to prevent the disclosure and unauthorized use of confidential or proprietary and trade secret information by employees on behalf of a competitor. The sports club and fitness industry is no exception and a recent lawsuit filed by nationwide fitness club, Equinox, demonstrates the importance of maintaining enforceable restrictive covenants in employment agreements.
In this suit filed in California state court, Equinox is alleging that its former fitness instructor breached his employment contract by creating a rival personal training company and using Equinox’s trade secrets to lure potential customers to his new business. The new personal training company is located within 10 miles of his former club. Equinox sought to protect its proprietary information through its employment agreement with the fitness instructor which specifically stated that all files and documents about club members, sales leads, employees, supplies and other entities that Equinox did business with belong to Equinox alone and could not be used by the instructor after he left the company. The suit, like many others in this context, seeks an order restraining him from continuing to breach his contract and requiring the instructor to disgorge profits he earned as a result of the breach.
The fitness industry, like many companies with customer service and sales personnel, must rely on narrowly tailored employment agreements to prevent employees from unfairly competing and stealing clients and customers post-employment. Because many state laws differ with respect to what is enforceable, companies with multiple or nationwide locations must review each state to ensure their agreements are enforceable. In fact, while California may consider non-competition restrictions to be unenforceable as a restraint on trade, California does allow companies to prevent disclosure of those trade secrets that are legitimate protectable interests of the company. A company in California and elsewhere, must ensure that the agreements are crafted to properly identify and protect the specific confidential information unique to them. Only through proactive measures and reviewing post-employment restrictions regularly can a company adequately protect confidential and trade secret information from leaving the company with a former employee.