I recently finished a hard fought non-compete case that settled the day before trial. Unlike most non-compete cases that resolve themselves early on during the temporary injunction fight, this non-compete contained a liquidated damages provision that specified the damage number in the event of a non-compete breach. The terms of the non-compete prevented the employer from seeking injunctive relief – the only remedy was the liquidated damages clause. The trial court ruled the non-compete was enforceable and the amount of the liquidated damages provision was never challenged. Even with those rulings/facts the case dragged on to the point of trial.
I’ve seen non-competes with liquidated damages provisions. I had not seen a non-compete that prevented the employer from seeking injunctive relief. This transformed what would be a typical non-compete case into a more traditional lawsuit. There are legitimate reasons why the employer did not include an injunctive relief component beyond the scope of this discussion. Even so, the lawsuit was resolved in a little over a year and was a day away from trial – that’s fast these days.
What are the lessons learned from the case?
- There is nothing better than having an enforceable non-compete – if on the employer side scrutinize the language of the non-compete during the drafting stage and when in doubt ask for less not more. The agreement needs to be narrowly tailored and reasonable;
- If a court modifies the non-compete the only relief available going forward is injunctive relief – not damages;
- Companies should consistently enforce their non-competes so a departing employee believes they will get sued if the breach; and
- Non-compete cases generally don’t go to trial.