How Do Non-Compete Agreements Work?
Hello, I’m Alan Crone, CEO of the Crone law Firm, and welcome back to a Legal Bulletin. Today’s question is, how do non-compete agreements work?
Well, they work in a very specific way for that specific non-compete agreement. Essentially, non-complete compete agreements come in a lot of different flavors, if you will. There’s the general non-compete that says you can’t compete against me in a specific industry for specific kinds of services or goods.
Then maybe you have more specialized or narrow non competes that are also non solicitation agreements.
In other words, you can’t solicit any customers of mine that you met or that I had while you were working for me. And these agreements have to achieve a specific, significant business objective. You can’t just put the blanket restriction out there without something balancing on your side for enforcement.
And so typically, the way they work is person leaves Company A, and Company A may remind them on their way out the door shortly after they’ve left, they may send them a letter that says, “hey, don’t forget, you have this non-compete. Here’s a copy and read it over and make sure you abide by it.”
And then they may keep their ear the ground. And if it turns out someone is, in their view, violating the non-compete, then that person may get a cease-and-desist letter from a lawyer from someone at the company saying, hey, we understand that you’re engaged in Activity X that violates your non-compete. Please stop. Send me proof that you’ve stopped this activity by a certain date, or we’re going to take further steps.
Often, non-compete dispute can be negotiated at that point, I would say frequently, 90% of these things get negotiated at some point. And then if the conduct continues, then the company may go to a judge, file a lawsuit, go to the judge, tell the judge what’s happening, and get a preliminary injunction or temporary injunction depending upon the jurisdiction. That’s essentially an order that says, “stop doing this particular activity.” Stop working for Company A, stop soliciting company A’s customers, stop working for Company B, whatever it might be until we can have a hearing about it.
And then in ten or 14 days, there will be a hearing with witnesses to determine whether or not there’s a breach of the agreement and whether an injunction is going to prevail until the end of the case. And then ultimately, what can happen at the end of the case is a permanent injunction and monetary damages, attorneys’ fees, other remedies that the enforcing company might seek against the person who they believe is illegally competing against them or breaching their non-compete agreement. So that’s generally speaking, how non-compete agreements work, there are as many variations of what I’ve just said as there are lawyers and situations out there.
Each situation is going to be a little bit different. Don’t be intimidated by it one way or the other. It’s a business litigation which means that at some point you hope that everybody’s business sense kicks in and there can be some sort of business workout. Now, in the extreme cases where someone really is trying to steal business, usurp business, or they feel like they’ve been wronged and that they shouldn’t have to abide by the non-compete, then those cases can be quite lengthy and quite expensive. So it’s best if you can get some sort of resolution early on. It’s best to do that.
Thank you for listening. I hope you’ve enjoyed this bulletin. If you have, please share it on social media or recommend it to a friend. I’m Alan Crone and I’m going to go get some justice. Thank you.
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