Archive for the ‘Non-Compete Agreements’ Category

Use of Injunctions to Enforce Non-Compete Agreements

Tuesday, May 8th, 2012

Injunctions may be used to enforce a variety of rights, including rights under a non-compete, non-disclosure, non-solicitation or similar types of agreements, particularly those related to unfair trade or business practices or involving trade secrets.

By far the most common use of an injunction in those situation is for an employer to attempt block subsequent employment by one of its current or former employees by an employer when it believes that employment violates such an agreement. However, most employees don’t realize that it is also possible for them to seek injunctions against their current or former employers to stop them from interfering with employment by a new employer in the right circumstances.

Injunction cases are very heavily fact-dependent, and injunction law varies from state to state, and those variations can be significant.  Further, judges have considerable discretion in how they handle injunction cases, and two judges may approach the same case differently.  The purpose section is to explain only in very broad terms what an injunction is and the basic procedures that are used in obtaining one.

An injunction is essentially designed to prevent a harm from occurring which would be difficult or impossible to remedy through payment of damages or through some other legal remedy. Injunctive relief is to prevent future wrongdoing, not to remedy past wrongs.  Injunctions are considered “equitable” remedies rather than legal remedies, and therefore use different standards.

The litigation of restraining orders and injunctions can be a time pressured process involving many of the same considerations as a trial on the merits. An injunction may either compel or prohibit a party’s future action.  There are three primary phases in the injunction proceedings, though in some circumstances different phases may be combined or omitted:

1.    Temporary restraining order;

2.    Preliminary or temporary injunction; and,

3.    Permanent injunction.

In some states, a temporary restraining order may be issued without notice to the other side and without a hearing, while other states require a hearing before issuing a temporary restraining order. The temporary restraining order and temporary or preliminary injunctions are temporary orders, while the permanent injunction is a permanent order going forward.

Also, in some cases it is necessary to post a bond before the temporary restraining order will be issued.  In some circumstance the requirement to post a bond may be waived.  The purpose of the bond is to pay damages to the party restrained or enjoined in the event it is determined that the restraining order or injunction was wrongfully issued.

The party moving for a restraining order must show that they are entitled to the relief requested, that they would be caused “irreparable” harm, and that there is no adequate remedy at law to address the injury . An applicant for a temporary or permanent injunction must generally establish a that there is a substantial likelihood of prevailing on the merits.  These requirements can require an extensive analysis that is beyond the scope of this section, but it would be a big mistake to simply assume that a party does, or does not, meet these requirements until that analysis is done.

The process for obtaining a restraining order or injunction is started by filing the appropriate pleading in the right court.  A temporary restraining order issued without notice to the other side is called an ex parte restraining order.  An ex parte restraining order may be issued by the court immediately in those instances where a hearing is not required, but courts have considerable discretion in that regard.  If the court chooses not to issue an ex parte restraining order, the court will normally set a hearing very quickly.  Sometimes when a hearing is held, the court will issue a temporary injunction rather than a temporary restraining order, with the difference being that temporary injunctions are ordinarily longer in duration than a temporary restraining order, and can last the duration of the case until a permanent injunction is issued or denied.

The issuance of a temporary (sometimes also called preliminary) or permanent injunction may each require a separate hearing.  Each hearing held (whether it’s for a temporary restraining order, temporary injunction or permanent injunction) is essentially a mini-trial  with evidence presented in the form witness and documents.  Discovery is conducted as with any other type of litigation, though the time frames for completing this discovery can be greatly accelerated in some circumstances.

Because of how fact-specific these cases are and because of the variations in the law between different jurisdictions, the ability to obtain a restraining order or injunction can only be determined by an attorney with knowledge and experience in this area of the law.  There is considerable misinformation among the general public about temporary restraining orders and injunctions, and it should never be assumed that a party can, or cannot, obtain an injunction (or defend against one) until this review has been done.

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Kansas City Business Law Attorney Explains What a Non-Compete Agreement is

Wednesday, February 23rd, 2011

There are several primary types of restrictive covenants that companies and small businesses will have an experienced business law tourney draft to protect their interests.  One of these restrictive covenants is called a non-compete agreement.

Non-compete agreements prevent the departing employees from using the experience and knowledge learned while on the job from starting their own business in direct competition.  A non-compete agreement may also protect a business from the damage caused by departing employees leaving their business to work for competitors, vendors or others generally within a specific geographic region and for a specific time period.

If you have an immediate legal need, please call 913-492-6200 to speak with Kansas City business attorney Rodney K. Murrow’s law office today for a complimentary consultation with an attorney licensed in Kansas and Missouri.

Our business law firm serves Kansas City, and the surrounding areas of Kansas and Missouri, including but not limited to, Topeka, Lawrence, Independence, Olathe, Overland Park, Liberty, Lee’s Summit, Ottawa, Mound City, Bonner Springs, Atchison, Paola, Emporia, Jefferson City, Salina, Eudora, Columbia, Springfield, Blue Springs, Concordia, Harrisonville, in KS and MO, as well as Wyandotte County, Leavenworth County, Johnson County, Douglas County, Jackson County, Clay County, Franklin County, Miami County, Linn County, Shawnee County, Cass County, Lyon County and Platte County.

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Protect Your Business with Non-compete Agreements

Friday, January 14th, 2011

Small businesses are increasingly using non-compete agreements to reduce the impact of the loss of their greatest assets: employees and the knowledge they possess.

The term non-compete is the common term for several different types of agreements more properly known collectively as restrictive covenants. It is absolutely critical that these agreements be drafted correctly to ensure that they are enforceable.

Properly drafted restrictive covenants can give a small business the ability to obtain an injunction to block a former employee from going to work for a prime competitor, recover attorney fees in the event the employee breaches the agreement and even allow the business to recover damages from the competitor who hires or retains the employee in violation of the agreement. However, poorly drafted or pro forma agreements can, at best, fail to provide adequate protection and, at worst, create additional legal problems for the employer.

Balancing Interests

The law governing restrictive covenants generally attempts to balance two conflicting and competing interests. On one hand, they seek to protect the legitimate business interests of employers in protecting confidential information, which can include everything from customer contacts to pricing and other trade secrets. On the other hand, the law also attempts to balance the legitimate right of employees to take their skills into the marketplace and sell them to the highest bidder. These laws vary from state to state, and differences in state law can be substantial. The law also is evolving as businesses increasingly require certain employees to sign them as a condition of employment.

Proper drafting of restrictive covenants requires careful examination of the facts of the employee’s job duties and the nature of the business or industry. Few types of contracts are more reliant on the specific facts than restrictive covenants. Slight changes in the facts can render the agreement unenforceable in whole or in part. An agreement that may be valid and enforceable in one industry or region may be unenforceable in a different industry in the same region or the same industry but in a different region.

Types of Restrictive Covenants

The primary types of restrictive covenants are non-compete, non-disclosure, non-solicitation and a category that has developed more recently, sometimes referred to as anti-raiding agreements.

  • Non-compete agreements prevent the departing employee from starting their own business in direct competition or working for competitors, vendors or others generally within a specific geographic region and for a specific time period.
  • Non-disclosure agreements prevent the departing worker from disclosing any confidential information. Non-disclosure agreements generally do not require time or geographic restrictions, or if such provisions are required, they are much broader than those enforceable in non-compete agreements.
  • Non-solicitation agreements prevent the departing employee from soliciting customers or business away from the former employer.
  • Anti-raiding agreements prevent a departing employee from attempting to hire other employees away from the previous employer. This scenario most commonly occurs when the departing employee is starting their own business or accepts employment with a subsequent employer in which they have hiring authority.

Validity of Contracts

Restrictive covenants cannot, and should not, be drafted in such a way as to act as a restraint on free competition in the marketplace. Courts will apply a number of factors in evaluating the validity of such agreements. Generally recognized protectable interests of the employer include customer contacts and trade secrets. The definition of “trade secret” is far broader and protects much more information than what many small business owners realize, including such areas as pricing.

Because restrictive covenants are actually contracts, the usual requirements for any valid contract apply, including the necessity of valid consideration for imposing the restrictions on the employee. This is easily done when the restrictive covenant is required as a hiring condition because the consideration is the employment itself. Consideration can be a bit trickier when the employer seeks to impose a restrictive covenant on an existing employee.

One final note of caution: because the use of restrictive covenants has become so prevalent in recent years, employers need to be wary of the possibility that an applicant for employment might be covered by such an agreement. If the prospective employer could be considered a competitor under the agreement, hiring the employee in violation of the agreement could expose the prospective employer to damage claims for interference with the agreement.

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