If you signed a valid non-compete agreement, try not to just forget about it. Former employers are using non-competes for more than just show nowadays, they are enforcing them aggressively. If you are thinking about working for your former employer’s competitor, or in another area that may be covered by a non-compete you previously signed, here are two ways your former employer may try to enforce the previous agreement against you.
Cease and Desist
First, attempted enforcement of a non-compete agreement in Connecticut will likely begin with a Cease and Desist Letter. Once the employer has determined (or has a good faith belief) that a former employee is breaching a non-compete, typically the next step will be to engage legal counsel to send a demand or “cease and desist” letter to the employee.
A well-drafted demand letter contains an accurate summary of the contractual, statutory and common law restrictions that bind the former employee, a summary of the facts showing that the former employee is in breach of his or her non-compete (or statutory or common law), a description of the harm suffered or potential harm the employer may suffer as a result of the former employee’s breach of duties, and a demand for specific actions and written assurances.
In many non-compete situations, it is also appropriate at this stage to send a separate demand letter to the former employee’s new employer setting forth the facts and arguments as to why the new employer’s engagement of the former employee will unlawfully interfere with the non-compete between the former employee and old employer.
Cease and desist letters must convey the message that the former employer takes the former employee’s continuing obligations seriously and will not allow its goodwill, trade secrets or confidential information to be unlawfully misappropriated. These letters are a critical tool because many non-compete situations are resolved by settlement following the exchange of the cease and desist letter and response.
Going to Court
Second, and more drastically, you may be taken to court. A former employer may file suit for a temporary restraining order, an injunction, and damages. If the non-compete situation is not resolved by the sending of cease and desist letters, then the employer must assess whether it will file a lawsuit to enforce the non-compete. Unlike most lawsuits, where the goal typically is to win a judgment awarding money damages after what is usually a lengthy process leading to trial, the goal in most non-compete situations is to obtain an immediate order from the court.
This order is called a preliminary injunction (or in certain emergency situations a temporary restraining order). A preliminary injunction will order the former employee (and new employer) to stop taking certain actions, such as working for a competitor altogether, calling on certain customers for the new employer, or using or disclosing confidential and proprietary information.
If the former employee or new employer violates the preliminary injunction, they are in contempt of court. The idea is that the preliminary injunction will stop the conduct, preserve the status quo between the parties, and prevent further harm to the former employer. A permanent injunction is issued after trial.
Seeking a Preliminary Injunction
Obviously, the decision to file suit and seek a preliminary injunction must be evaluated carefully given the expense and uncertainty of litigation. This is particularly so in non-compete situations where the outcome of litigation is often influenced to a large degree by particular judges’ views on non-competes generally.
In order to obtain a preliminary injunction, the employer must establish that it is entitled to such relief by showing that: the employer is likely to prevail on the merits of the case at trial; the employer faces irreparable harm; the balance of harm (that facing the employer as compared with the harm the former employee could suffer by, for example, not being able to work for a particular new employer) favors the issuance of an injunction; and the public interest is not adversely affected by the issuance of a preliminary injunction.
In addition to assessing whether this standard can be met, the employer should pause to consider whether it will come to court with “clean hands” (that is, whether it has acted fairly). The issuance of a preliminary injunction is a matter squarely in the judge’s discretion and is a matter of equity (fairness), so it is important that the employer not overreach but rather only seek the protection necessary to prevent the misappropriation of goodwill, trade secrets, and confidential information.
Considerations to Make Before Filing a Lawsuit
Similarly, before embarking on litigation, the employer should evaluate whether it has breached any obligation to the former employee (such as the obligation to pay salary or commissions). Such facts will influence whether the court will grant an injunction, and also will likely result in the assertion of counterclaims against the employer in the lawsuit.
The assessment of whether to file a lawsuit must be made quickly. Delay undermines the argument that the former employee’s current actions are actively harming the employer’s business, and may in rare cases result in the former employee filing suit to obtain a declaration from the court that the non-compete is unenforceable.
Credit: Mbbp.com, Robert Shea, Scott Connolly
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If an employer is trying to enforce a non-compete against you, or if you are an employer looking to enforce a non-compete against a former employee, let the experience Employment Law Group of Maya Murphy, P.C. in Westport, CT help you with this process.
If you have any questions regarding employment law matters, do not hesitate to contact Joseph Maya and the other experienced attorneys of Maya Murphy at (203) 221-3100 or Ask@mayalaw.com to schedule a consultation today.