When a party to a Covenant Not to Compete seeks to enforce that same covenant, they have limited options. Each case is different, and the party should consult with their attorney before taking any action. Improperly addressing the issue could cost the party their rights of enforcement, potential remedies, and could even subject them to a lawsuit.
The primary method of enforcement of a Covenant Not to Compete is an Injunction. An “Injunction” is an order from a Court of competent Jurisdiction, prohibiting a person or entity from doing something. In the case of enforcement of the Covenant Not to Compete, an Injunction would prohibit the former employee from conducting the same type of business within the same geographic area as their former employer, for a fixed period of time.
The prime example is when a Sales Representative, who has signed a Covenant Not to Compete with their employer, leaves that company and goes to work for one of their competitors. At the new job, the Sales Representative would naturally wish to continue selling products or services to the customers they served at their previous job. The Covenant Not to Compete will typically prohibit this.
In the foregoing example, the Sales Representative’s former employer would consult their attorney. The attorney may then draft a demand letter, seek a “Temporary Injunction”, and/or bring a lawsuit for claims in addition to the Sales Representative’s breach of the Covenant. The proper action to take is dependant entirely on the individual circumstances of the case, and can only be properly evaluated by a competent attorney. Once the lawsuit has been brought against the former employee, the Judge will review the laws concerning Covenants Not to Compete, and interpret the terms of the contract between the Sales Representative and the former employer. Other facts and evidence may need to be introduced, and the parties will address the issues surrounding the case.
The outcome of the case will be dependant on the language of the Covenant Not to Compete, the transaction at the time of the Covenant’s signing, the nature of the Employment, and the terms of the agreement between the former Employee and Employer. Every case is different, and many details can affect the outcome of such a case.
Next: What are the limitations on a Covenant Not to Compete?