How Serious is a Non-Compete Agreement?
Non-compete agreements, which forbid workers from competing with their previous employer after leaving their position, are frequently used by businesses in the modern market climate. And although these contracts are quite prevalent, many are invalid or unenforceable because they lay an excessively onerous burden on the former employee. First, the non-compete agreement must be legally binding and enforceable for your former employer to sue you for breaching it. You can read about whether an employment contract is enforceable here.
This blog post will dig into what kind of trouble you could be looking at if you’ve breached a non-compete. If you find yourself in a situation where you’re wondering how serious non-compete agreements are, you should know that breaching a non-compete can result in serious consequences. So, with that in mind: non-compete agreements are pretty serious.
So, what happens if you break a non-compete agreement or think you could be breaking one?
If your former employer does sue you, the lawsuit may seek monetary damages and actual losses experienced by your company, or it may only seek to compel you to abide by the non-compete agreement by requesting an injunction against you. In some cases, the former employer will seek monetary damages and an injunction in the same lawsuit.
Here’s how each scenario plays out:
Injunctions: Your former employer will try to compel you to quit your new job
Injunctions are by far the most frequently requested and granted relief. It can prove difficult for an employer to establish damages, so they may choose not to try. Instead, they request that the court uphold the non-compete clause and that the employee quit their new position.
Monetary Damages: Your former employer may try to recover lost profit from your breach
However, previous employers also seek damages (most often, but not always, against the former employee). Compensatory damages are a common type of damages, commonly known as restitution for lost profit due to the breach. Of course, proving that a loss occurred is necessary for the employer to recover. Depending on what the employer can come up with to show in court, the damages can range from a relatively insignificant amount to large sums of money.
Punitive Damages: Your former employer may try to claim you meant to harm them
Punitive damages for malicious behavior are another common category of damages. For such a claim to succeed, the former employer must prove that you meant to harm them financially. If they can prove this, monetary damages will be added to your former employer’s award as a punishment for your wrongful behavior.
In a contract, liquidated damages are specified as a sum of money (or a formula for determining a sum of money) that a party will pay in the event of a contract breach. For example, employers may specify in writing that the employee will have to pay a fine if they violate the terms of the non-compete agreement. However, before ordering you to pay, courts have the authority to determine whether the sum is reasonable.
If you think you could be in violation of a non-compete agreement, it is strongly urged that you get competent legal advice because the penalties for doing so could be quite severe. The Crone Law Firm’s non-compete attorneys regularly draft non-compete agreements and litigate non-compete actions. If you need an experienced employment law attorney in Memphis, TN; St. Louis, MO, or surrounding areas (including Germantown, TN, Collierville, TN and Clayton, MO), contact The Crone Law Firm by filling out our client form or calling (901) 737-7740.