What relief is available for breach of a non-competition agreement?
When a party breaches a non-competition agreement, or non-compete, the most common remedy is an injunction barring that party from further conduct that would constitute a violation the agreement’s terms. Because non-competes with employees must be limited in their duration and geographic scope, an injunction enforcing such agreements will reflect those limitations. If the defendant violates the injunction, the court may enforce it through monetary penalties and may extend or expand the injunction.
While injunctions are often granted to remedy breaches of non-competes, courts do not issue them automatically. Generally, courts consider: (1) whether the plaintiff faces “irreparable harm” – i.e., injury that cannot be remedied through money damages; (2) whether the harm to the defendant outweighs the harm the plaintiff has demonstrated; and (3) how the dispute impacts the public interests.
When the plaintiff is an employer and the defendant an employee, courts will consider, among other things, whether the employer stands to lose client relationships and customer goodwill, and whether the employee had access to competitively sensitive information that could be shared with a new employer. Courts typically find irreparable harm when the employer has credible evidence that breach of the non-compete led to disclosure of confidential information or the loss of customer relationships and goodwill. When balancing the parties’ interests, courts will also consider whether the employee has alternative means to earn a living and the effect of an injunction on the employee’s future career prospects. As for the public interest, courts will consider the nature of the employee’s work. If it is critical to the public – for example, if the employee provides essential medical services – a court will be less likely to issue an injunction.
Beyond the typical remedy of injunctive relief, it is possible for a plaintiff to recover damages for losses suffered due to breach of non-compete. Such damages usually take the form of lost profits the plaintiff would have earned if not for the breach, or additional costs the plaintiff incurred in responding to the breach.
If a company believes a non-compete has been breached, it should consult experienced counsel about how best to enforce its rights. Early analysis of the non-compete and the breach can determine what relief is available and identify the best strategies for obtaining it.
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