Non-compete agreements serve an important purpose: To protect a company's interests after an employee departs. An issue involving non-compete agreements recently entered the news in New York.
USI Insurance Services, L.L.C., is suing a former broker at Wells Fargo Insurance Services USA. Chad Elgas is accused of being in violation of his non-compete agreement.
Chain of events leading to the filing of the USI complaint
USI acquired Wells Fargo's insurance division in June 2017. At that point, Elgas left the newly formed company for a competitor, Lockton, along with several other members of his team.
The agreement he signed stipulated that he not solicit any Wells Fargo customers for two years. It also prohibited him from revealing any trade secrets or confidential information.
USI's complaint alleges that Elgas began to actively solicit his former Wells Fargo clients, while his new company, Lockton encouraged the practice. The complaint adds that Elgas used confidential information owned by Wells Fargo in order to complete these transactions.
USI's plan of attack
USI has requested a permanent injunction which includes returning any confidential information to Wells Fargo. They also requested that Elgas relinquish his personal computer and other electronic devices, so that Wells Fargo investigators could review the contents.
Lockton responded to the allegations by saying they were looking forward to challenging them in court.
Other former Wells Fargo brokers also in hot water
EPIC insurance recently announced a planned expansion to Pittsburg with other former members of the Wells Fargo Insurance Services team. Wells Fargo is litigating over the non-compete agreements they signed.
EPIC's new employees filed an injunction to dismiss the case stating that Wells Fargo sold their entire insurance brokerage business and no longer has the right to enforce its non-compete agreements.
The question of how long and under what circumstances an employer can control the future employment and business of former employees is certainly at the heart the litigation.
The nature of non-compete agreements is complex. Should a former employer accuse you of violating a non-compete agreement it is a good idea to consult an attorney who specializes in business litigation and breach of contract.