May 25, 2021
By: Colin A. Walker
Litigation of disputes between an employer-company and a C-Level executive can take many forms. Claims for breach of an employment agreement, IP agreement, or non-compete or non-solicitation agreement are common. Misappropriation of trade secrets is often asserted, especially if the executive accumulates company materials while working from home, on business trips, or working remotely, as many executives do. In such cases, possession of company information (even trade secrets) may be innocent, but, of course, opinions often differ on whether it was innocent.
In extreme cases, the company may try to obtain a temporary restraining order or preliminary injunction. This is an expedited proceeding where the court holds a hearing early in the case, sometimes with expedited discovery, and decides whether to enter a temporary or preliminary order (injunction) which is in effect until the trial. The moving party carries a heavy burden and must show that it would suffer immediate, irreparable harm if the order is not issued. These proceedings are expensive and stressful but appropriate in cases such as misappropriation of trade secrets or violation of a non-compete agreement. Other claims are handled in the normal course of the court’s docket and usually take 1-2 years to litigate through trial.
Wage claims are also common particularly for non-discretionary bonuses and commissions. Most wage claim laws carry stiff penalties and allow employees to recover attorneys’ fees. While severance pay is not considered wages under the laws of most states, it can be asserted as a breach of contract claim, based on an employment agreement or severance agreement.
All parties should be careful to preserve all documents and information which could be relevant to the litigation. Failure to do so can result in severe sanctions from a court for “spoliation” of evidence. Sanctions could include payment of the other party’s attorneys’ fees, an inference that the lost evidence would have been unfavorable to the party who failed to preserve it, and, in severe cases, even default judgment. Parties should be particularly careful with electronic documents such as emails and text messages, which may be deleted unintentionally pursuant to document retention/destruction protocols. Any such procedures sound be discontinued until all evidence has been preserved.
Litigation is expensive, time-consuming, stressful and risky. In most cases, it is in the interests of the employer and the C-Level Executive to avoid it or to settle quickly. However, in some cases, litigation is necessary to protect the interests of the employer of the executive, or both. It is essential for both parties to consult experienced litigation counsel and to think carefully about how they wish to proceed.