posts, we discussed some considerations in drafting restrictive
covenants. Today we'll talk about trying to enforce them.
So your employee has left and you hear he is working for a
competitor. He has a non-compete. Your lawyer sends a cease and
desist letter and gets a response from another lawyer. Perhaps the
response will say "My client is terribly sorry that he
violated the restrictive covenant and he promises to stop right
now." If so, go buy a lottery ticket. More likely, you get a
response that says, essentially "The covenant is too broad,
he's not using any confidential information, our businesses are
very different", and anything else the lawyer can think
So you ramp up for litigation. What does this involve,
You can sue for damages for breach of the restrictive covenant.
But trial can be well over a year away, and damages may be
difficult to assess, or insufficient to remedy the harm your
business is suffering now. If a key employee with specialized
knowledge walks out the door and starts competing, he may destroy
your business by the time trial comes around. The logical response
is to seek an injunction- a court order before trial which
prohibits the employee from breaching the restrictive covenant.
Injunction applications are heard by a judge based on affidavit
evidence. They are usually brought and heard very quickly.
Accordingly, parties bringing or defending such an application need
to be prepared tospend a lot of time working with their lawyers, on
a very short timeframe, to gather information and prepare
A broad range of evidence may be relevant. The Defendant likely
will argue that the restrictive covenant is unreasonably broad. The
Plaintiff/Applicant will need to show that the restrictive covenant
is no broader than necessary to protect its legitimate business
interests. The evidence should include:
detailed information about the nature of the applicant's
business, market, customers, and suppliers;
the former employee's role, details of his current activity
in breach of the restrictive covenant, and specifics of how he is
harming the former employer's business; and
information to show why damages would be inadequate and only an
injunction can address the harm being caused.
If an injunction is granted, it will stay in place until trial.
Because trial will usually be a year or more away, the injunction
application is very important to both sides.
If an injunction is not granted, it is still possible to pursue
damages at trial. But by then, if customers and market share have
been lost, the damages may not provide much relief.
All of the costs and risks must be weighed when deciding on if
and how to enforce a restrictive covenant. There are always
uncertainties in the enforceability of the covenant itself and in
the injunction process.
The best strategy is to control some of those uncertainties from
the outset - draft reasonable restrictive covenants with the intent
of full enforcement and then follow through so your employees know
that you are serious about protecting your business.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Labour and employment law had some interesting developments in 2016. What follows are a few highlights from the last year and an introduction to an issue that may attract significant attention in 2017.
Businesses and employers face exposure to a variety of claims for mismanagement or misuse of personal information by employees. Damages may depend on how sensitive the information is and how it is misused.
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