In the modern corporate environment, many companies utilize non-compete agreements, which prevent employees from entering into competition with their former employer after their employment is terminated. While these agreements are fairly commonplace, many non-competes are not valid or enforceable, due to overly strict burdens inflicted upon the former employee. In instances where non-compete agreements are found to be valid and enforceable, you as a former employee could be subject to a number of legal actions, ranging from a simple injunction to severe monetary penalties. So, what happens if you violate a non-compete agreement or suspect you may be in violation of a non-compete?
Legal Ramifications of Violating a Non-Compete Agreement
Generally, if you violate a valid and enforceable non-compete agreement, it is likely that your employer will file a lawsuit against you. This lawsuit could seek compensation for money damages and actual losses suffered by your employer, could simply seek to enforce the non-compete agreement by filing an injunction against you (a court order directing you to honor the non-compete agreement), or could seek both money damages and an injunction simultaneously. In very rare cases, the court may prevent you from working for a competitor for the duration specified in the non-compete.
Lawsuit for Money Damages
There are a number of forms of money damages for which employers can seek compensation. One of the popular forms is punitive damages for malicious conduct. This form requires the employer to show strong evidence for malicious conduct. If they are successful in doing so, you could be subject to punitive damages.
Another common form is liquidated damages. Liquidated damages are typically specified in the non-compete agreement in the event that an employee breaches the non-compete. If the non-compete is valid and enforceable, you as a former employee could be required to pay money damages in the amount specified in the non-compete. However, courts do have the ability to decide whether the amount is reasonable before requiring you to pay it.
Lawsuit for Actual Losses Suffered by Your Employer
In addition to compensation for malicious conduct or liquidated damages, an employer may also seek compensation for actual losses – that is damages to profits that resulted from breaching the non-compete. This puts the burden on the employer to provide evidence that violation of the non-compete resulted in actual losses, but if they are successful in doing so, you could be facing enormous financial damages in worst case scenarios.
Lawsuit Seeking to Enforce an Injunction Against You
While employers do seek damages, by far the most commonly sought and granted lawsuit that is brought in the wake of a non-compete violation is an injunction. These are more common because oftentimes employers cannot or do not try to prove that there are damages. Instead, they ask the court to uphold the non-compete agreement and make the employee leave the new employer.
How Do I Know If I Violated A Non-Compete?
In order to have violated a non-compete, the agreement you signed must be found to be both legally valid and enforceable. Non-compete agreements can be invalidated for a variety of reasons, usually because they unreasonably encumber the employee. Common reasons courts find non-compete agreements include:
- Lack of Consideration – For an non-compete agreement to be valid, your employer must have given you something of value in exchange for your agreement not to compete. If consideration is missing, your agreement may be invalidated by the courts.
- Too Long – A non-compete agreement must be reasonable and must not prevent you from seeking gainful employment for an extended period. Agreements that are two to three years in length are often reasonable, but anything longer than that may be invalidated by the court.
- Too Geographically Broad – An agreement must not be too geographically broad, meaning if your employer operates in a small geographical location, he may not bar you from seeking employment everywhere in the U.S. The agreement must be geographically limited in scope to prevent you from competing within the geographic location of your employer.
Non-competes can be difficult to navigate and it can be difficult to tell whether an agreement is actually enforceable or not. Because the damages for violating a non-compete agreement could potentially be very severe, it is highly advised that you seek professional legal counsel if you suspect you may be in violation of one.
Reach Out to An Employment Law Attorney
If you are concerned about having violated a non-compete agreement, consult with an experienced employment law attorney at The Brown Firm. Our professional attorneys can assist you in navigating the complexities of non-compete agreements and advise you as towards your available courses of action.