Recently, a Delaware court case (Newell Rubbermaid v. Storm) drew notice for enjoining the breach of a noncompete agreement contained in an equity award that had been delivered to and accepted by the employee online.
As discussed in this recent McGuireWoods news item, the court in a recent Virginia case (MeadWestvaco Corp. v. Bates) also granted temporary injunctive relief to an employer to enforce restrictive covenants contained in equity award documents that an employee had acknowledged online. The facts in MeadWestvaco are similar to the facts in Newell Rubbermaid in that the evidence showed that the employee had agreed to online acceptance of the stock award, required by "log-in" and specific "click" to accept the grant (including terms and conditions). What makes the MeadWestvaco case even more interesting, however, is that the equity award documents in question did not even include any language identifying temporary injunctive relief as a potential remedy for breach. In fact the only remedy referenced in the documents was forfeiture of the equity compensation. The court granted the injunctive relief anyway, holding that the failure to include injunctive relief language wasn't fatal.
Together, the MeadWestvaco and Newell Rubbermaid cases illustrate that narrowly drawn restrictive covenants in employee equity awards can, in appropriate circumstances, be enforced through the full set of available remedies (including injunctive relief), not just forfeiture of the award, even where the agreement has been accepted online and even where the award documents don't specifically refer to remedies other than forfeiture.
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.
