“Perhaps all pleasure is only relief.”

– William S. Burroughs

ACTUAL CASE HISTORY: Most employment contracts have a section in them, usually toward the end of the contract, labeled “Injunctive Relief,” or a phrase containing similar sounding words. It is inserted into employment contracts by employers’ legal counsel.

Contrary to many of my blog posts on clauses in employment contracts, it is a welcome change of pace to share with readers that this clause, in particular, is not very dangerous, risky or frightening. Those who commonly handle cases in which “injunctive relief” is requested will likely admit these clauses are of limited utility.

This is what an “Injunctive Relief” clause generally looks like:

“The Employee and Employer agree that, if the Employee breaches or threatens to breach his or her obligations not to compete, or not to violate confidentiality, it would cause irreparable injury, and the amount of money damages would be difficult to establish. For this reason Employee and Employer agree that, in such event, the Employer is entitled to Injunctive Relief to prevent or restrain any such breach.”

Even though they do not pose any danger or risk, employees should understand what these clauses mean, why they are inserted into employment contracts, and the few points employees might raise in response.

LESSON TO LEARN: Even though “injunctive relief” clauses are not usually harmful to employees, understanding what they mean can only help. To understand “Injunctive Relief” contract clauses, let’s start with some basics:

A Brief History –

Many years ago, we used to have two kinds of Courts, one kind called “Law Courts,” in which people or companies sued each other for money, and the other kind called “Equity Courts,” in which people or companies sued each other for “equity,” which is another word for “fairness.” Suing for “fairness?” “Fairness” lawsuits generally seek a Court to Order someone to do something or stop doing it. Perhaps injunctive relief can be best illustrated by this example:

Suppose two farms sat next to each other for 200 years. Many years ago, property deeds would often describe property boundaries as “from the oak tree to the edge of the pond,” or “the boundary line is the stream.” Using the “stream-boundary” example, suppose one day a big storm deposits so much rain that the stream overflows, and makes a new path, which now cuts one of the farms in half.

Did the original farmers intend the boundaries of the two farms to be changed whenever a big storm came around? Or was it their intention to use the stream path only as a convenience, and later disregard the effects of droughts, storms and even beavers? Did the deed say “wherever the stream might meander?” If two farmers could not agree on who owns how many acres, and one started to till the soil on the disputed land, the other could go to Court asking the Judge to Order him to stop, and declare whose land it is.

Granting “Injunctive Relief” is entirely within a Judge’s Discretion. –

Years ago, the two kinds of Courts were combined into today’s Courts, but we can still seek either “money damages” or “equitable relief.” In today’s employment law, “injunctive relief” is commonly sought by employers seeking a Court Order to (a) stop a current or former employee from sharing or using “trade secrets” or (b) stop a former employee from violating a non-competition agreement.

When employees seek Injunctive Relief (which is not very common) it is most often to seek a Court Order demanding a former employer stop interfering with the employee’s new employment, or disparaging the former employee.

Whether or not to grant such Injunctive Relief is entirely up to the Judge, who must decide if it is necessary and if it will impose an undue burden on the freedom of a person to work and earn a living. The Judge looks at many different things to decide what is fair, and two Judges could easily differ on that conclusion. He or she actually “weighs” the effect on both parties, in what is actually called a “balancing of the equities.” It literally is “the scales of justice” in action.

Such Provisions are usually “toothless tigers,” but any kind of “tiger” can seem scary. –

The important point here is that Courts hardly ever give much credence to what the employer and employee agreed in a contract months or years earlier regarding what the Court should do. It is the facts, events and circumstances at the time that a Court is concerned with.

So, you may ask, “Why does an employer insert an Injunctive Relief clause into an employment contract, and why would an employee care?” In my experience, Injunctive Relief clauses are instruments of fear, nothing less and nothing more.

They are inserted into employment contracts to create the illusion that even a “possible,” “potential” or “threatened” violation of an employment contract will result in a Court Order against the employee, like the Wizard of Oz behind the curtain who really had no power. It is a kind of legal bullying, intended to send an employee the implicit message, “Don’t even THINK of not honoring these obligations!” But, to continue the analogy, you can never be sure a tiger is truly “toothless” unless you get so close to the tiger that you can actually see into its mouth.

No matter what, you should carefully read “Injunctive Relief” clauses, not so much because of what they say, but sometimes other things – potentially risky or expensive to you – that may be woven into the otherwise “toothless” language.

WHAT YOU CAN DO: When looking over an employment agreement, read every section and every word, even if it seems to make you sleepy to do so. Don’t be fearful of Injunctive Relief clauses, because they do not represent any real risk to you, but do beware of other items that might be inserted into them:
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An Effective Way to Analyze Your Restrictions

“Limits, like fear, are often an illusion.”

– Michael Jordan

ACTUAL CASE HISTORY: For two weeks we were in a pitched battle in Federal court, trying to convince a Federal Judge to negate a non-competition agreement. Both sides had submitted legal briefs, and the Federal Judge ordered “oral argument,” which is each side giving its position, and the Judge hammering away at each side’s arguments with his questions.

Our client was a salesman in the field of medical devices, specializing in the sale of manufactured, artificial heart valves to hospitals for surgical replacement of damaged valves. After leaving his prior employer, he took a new job, and was doing quite well – until he was sued, and his new employer placed him on “Suspension – Leave of Absence” until the case was over.

In preparation for the upcoming “oral arguments” in perhaps my tenth reading of the non-competition agreement, I discovered something that no one else had discovered before, not even the Judge: the non-competition agreement was not, in fact, a non-competition agreement.

My careful reading revealed that working for a competitor was not, in fact, prohibited. What the supposed non-compete agreement prohibited was “working for a competing medical device manufacturer, anywhere in the eastern half of the United States, that sells to hospitals replacement heart valves based on the same technology.”

That last phrase, those final five words, and their importance, had somehow escaped notice by several people. There was no prohibition against working for a competitor, but only on working for a competitor while selling heart valves based on the same technology. The restriction was on using a certain technology more than it was on working for a competitor.

In fact, the new employer did not sell manufactured, artificial heart valves, but instead heart valves derived from the hearts of pigs. Neither the lawyers nor the Judge were familiar with the technology, and just assumed the same technology was used. Fortunately, I recalled hearing of the distinction during my initial, in-depth consultation with my client.

We asked permission to submit a supplemental brief to the Court on this very point, and the Judge permitted it. After conferring with their client, the former employer’s attorneys withdrew the case. Noticing just five words – based on the same technology – that’s all it took.

LESSON TO LEARN: When it comes to non-competition and non-solicitation agreements, “The answer to your question is almost always right there, in the words.” Reading dense legal agreements can sure put a lot of people to sleep – including lawyers. That’s always the case in law, but there is no substitute for careful reading and analysis, especially when it comes to non-competition agreements and non-solicitation agreements.

I have seen it time and time again: the applicability, effect, validity, and duration of non-competition and non-solicitation agreements being misread and misunderstood, and for this reason unnecessarily limiting the client’s career by false fears. I’ve seen it time and again: highly qualified and experienced lawyers telling their clients “Sorry, there is nothing we can do” when, in fact, all that is necessary to win a person’s employment freedom is to read and analyze carefully.

To assist you in doing that for yourself, in my 30+ years of handling non-competition and non-solicitation disputes, I’ve devised a rather simple way to analyze non-competition and non-solicitation agreements. It’s what I have come to call “C.A.T.C.H.,” which stands for (1) Competition, (2) Activity, (3) Time, (4) Conditions, and (5) Horizon.

This is not the usual, hackneyed “Geography, Duration, Scope” legal analysis that so many lawyers will refer to when discussing non-competition agreements. What they would be talking about is that a Judge will often look at the reasonableness of the restrictions’ “Geography, Duration, Scope” and cut one or more of them down if the Judge thinks they are unreasonable.

Our “C.A.T.C.H.” analysis is more immediate, more valuable and more important: “Does this non-competition or non-solicitation agreement even apply to you?” Might careful reading and analysis reveal you have no reason to hire an attorney, due to potentially unfounded fear based on an incorrect analysis? Why hire an attorney, and consider going to Court, if you really don’t need to? More importantly, why turn down a job offer, or not seek one, if you are not really restricted?

This endeavor is not “legal nit-picking.” Instead, it is the essential task of every employed person: to protect your employment freedom, and to utilize your business skills, experience and relations to your very best advantage.

I hope you find my “C.A.T.C.H.” analysis helpful, and its title a little “catchy.”

WHAT YOU CAN DO: Here’s eight steps you can use to help yourself understand whether or not, how badly or not, you may be restricted by a non-competition agreement or non-solicitation clause you have signed, or you may be asked to sign. And, too, they may help you understand how to get around any such restrictions. As Michael Jordan says, “Limits, like fear, are often an illusion.”
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Be Prepared to Promise It, but Can You Deliver?

“Promises are like babies: easy to make, not so easy to deliver.”

– Anonymous

ACTUAL “CASE HISTORY”: It happens at least once a week. A client contacts us quite pleased to have received a job offer, and asks us to do a “simple review” of the offer letter or employment agreement. The client’s request is almost always a sensible one, because almost always their job title and salary have been agreed upon, and everything else seems to be just “the usual stuff.”

My first question is often “Are you sure you can take the job?” Said differently, “Are you totally unrestricted?” The client’s response is usually a quizzical look, or simply, “What do you mean?”

I explain that many of my clients have accepted job offers they have no legal right to accept, and thus cannot fulfill the duties they have promised to fulfill, all because of one or more agreements they entered into with their present (or even former) employers.

To retain their employees, more and more employers are setting up “legal roadblocks” on their employees’ paths to working elsewhere. (I guess giving them raises is not as popular.) As a result, the number of non-competition clauses and agreements, non-solicitation clauses and agreements, non-interference clauses and agreements, “garden leave” requirements, minimum notice provisions, and other such restrictions is surely on the rise.

Such “restrictive covenants,” (a legal phrase for “agreements to restrict one’s freedom”) can be found in many places, including offer letters, bonus award agreements, commission plans, promotion letters, stock or equity plans, and even, at times, employee handbooks. Every now and then the client learns that he or she cannot take the job offer they have tried do so hard to get.

The problem is this: more and more employers are requiring that new employees promise in writing that they have never signed any agreement that would “restrict” them on the new job. When I ask if they have, most of my clients tell me either “I don’t think so,” or “Maybe, a long time ago.”

The real practical concern is that we will miss such a agreed-to restriction, and two weeks after the new job starts, the new employer get what we call “The Letter” from the former employer’s lawyer that says, in large, legal words “You must fire your new employee because he/she is violating an agreement not to work for you, or not to do what he/she is doing for you.” Ouch! There goes that new job. And, making matters, worse, the firing by the new employer might be considered for bad conduct. Double ouch!!

LESSON TO LEARN: Whether or not you are looking for a new job, it is wise to carefully consider whether or not you have complete or partial “new job freedom.” You never know when some recruiter just might call you, or you might meet someone at a conference who is interested in hiring you. It’s always good to know if you are entirely free to take a new job, or restricted in some way, and if so, in what ways.

If you are taking a new job, you should expect that you will be asked to sign an agreement or clause that says something like the following:

“I hereby promise and certify to XYZ Company that: (a) I have the unrestricted right to enter into this agreement, and to perform all of my anticipated duties, (b) I have never signed any agreement, clause, covenant or promise for any former employer that would prohibit or in any degree restrict, detract or affect my doing so.”

Your failure to take the time and make the effort – before you go to any interview – to be entirely clear on this issue can only delay your taking a new job, or worse, could get you fired for taking it. But, like we always say, “Forewarned is forearmed.” And, as Benjamin Franklin said, “Those who fail to plan, plan to fail.”

WHAT YOU CAN DO: To keep yourself aware of the restrictions, if any, that prohibit or restrict you from taking new jobs, here are a five pointers:
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Question: I was a sales rep for a welding supply distributor. I quit my old job and I came to this new job. I never signed any non-compete agreement. A customer of my old job contacted me asking for a quote on argon, something both my old employer and my new employer sell. That quote went well, and now we have their argon business.

Then my former employer sued me and my new employer for a breach of contract for $50,000. Since then, to settle the suit, my new employer and my old employer agreed – without me being involved – that I would not work for my new employer for 24 months.

Now I am unemployed. Can I sue my old employer for interference?

Dan
Mundelin, Illinois

Answer: Dear Dan: Your situation is becoming more and more common. Here is the relevant analysis to follow to get the answer to your question:                

1. If you did not sign a non-compete agreement, you are entirely free to go to work for a competitor of your former employer. The freedom to work for whom you want to is a very basic and fundamental freedom, and an important part of the free-market, free enterprise system. If you did not sign a non-compete agreement, then you cannot be “legally” sued for violating it. That said, some employers use threats of litigation, and actual litigation, as improper “weapons” to get what they want. And, sadly, sometimes it works.  

2. However, your former employer may have alleged that you violated a different kind of “agreement” that is implied in the law: the implied agreement (i) not to be disloyal while still employed there, (ii) not to steal customer lists, and/or (iii) not to steal pricing information. While you may not have signed an agreement not to compete after you left, the law says that every employee must honor an “implied” contract not to (i) tell customers to come along with you before you leave the old employer, (ii) take client lists with you, or (iii) take pricing information with you. It is possible you violated one or more of these “implied” agreements, or that your former employer believes you did.

3. If you did not violate either (a) a written non-compete agreement, or (b) one of the “implied” agreements noted above, then you may just have a good case of “interference” to sue for. A growing area of employment law is what employment lawyers call “unjustified interference,” or “tortious interference” by a former employer with an employee’s new work relation. It is just what it sounds like: interfering with someone’s employment without a justifiable reason. Sadly, more and more employers seem to be engaging in such wrongful behavior in an attempt to hold on to their business when their employees leave them.

4. In order to win such a “tortious interference” case in most states, you would need to establish the four elements: (i) an existing employment (or business) relation, (ii) interference with that employment (or business) relation, (iii) for the sole purpose of harming  that employment (or business) relation, and (iv) harm to the relation. As lawyers, we try to make sure that we can establish the necessary “elements” of a case before we start the case. In your facts, it seems clear that (i) you began a new business relation (that is, employment) with your new employer, (ii) your former employer interfered, and (iii) your employment was damaged, that is, you were fired. There is one element I’m not sure about, and it is the most important element in any of these cases: Did your former employer have any good, proper and justifiable reason to do what they did, or did they act simply to hurt you and your new job? That is almost always the “missing element.”

If your former employer can show that they had some reasonable information that (a) while you worked for your former employer, you told their customers to leave with you, or (b) you took with you and used their secret customer lists, or (c) you took with you and used their secret pricing information, then they have a good, proper and justifiable reason to take steps to protect themselves. On the other hand, if they did not have such a good reason, then they can be sued successfully for “tortious interference with business relations.”

Dan, you know the facts here. If you seem to have the four necessary elements of a lawsuit for tortious interference, I suggest you consider consulting with an experienced employment attorney in your area.

If you would like a list of experienced employment attorneys in your area, which seems close to Chicago, simply [click here].

Thanks for writing in. I hope this is helpful. Good luck in your upcoming job search.  

Best,
Al Sklover

P.S.: To obtain personal attention and counsel, Al Sklover is available for Private Telephone Consultations on the subject of Non-Competition and Related Restrictions on your working freedom. Choose 30-, 60- or 120-minutes. If interested, just [click here.]

Repairing the World –
One Empowered and Productive Employee at a Time ™

© 2012 Alan L. Sklover, All Rights Reserved.

Question: My position was recently eliminated and a job with lesser financial potential was offered. I turned it down. My employer offered me severance, which I plan to accept when the agreement is given to me, and I am presently unemployed.

I previously signed a non-competition / non-solicitation agreement, and will soon be getting the severance agreement.

Customers of the company have contacted me with offers of employment in different fields. They are continuing to do business with my former employer.

Even though I signed the non-competition / non-solicitation agreement, and I plan to sign the severance agreement, can I seek employment with these customers?

        Susan              
        Sayreville, New Jersey          

Answer:  Susan, the answer to your question depends entirely on the words in your two agreements. They need to be read carefully, with your question in mind.

Usually, non-competition agreements prohibit you from working for a competitor for a certain period of time. If the “customers” you refer to are not competitors, you probably have no problem here. However, if they compete somewhat with your employer, but are offering you employment in a “different field,” you may or may not have a problem. Some “non-competes” say you can’t work for a company that does ANY competition. Some say you, yourself, can’t engage in competitive activities. Again, the wording of your non-compete provision will determine if you have a problem. 

Usually, non-solicitation agreements prohibit you from soliciting business away from your former employer, or soliciting employees away from your former employer, for a certain period of time. If working for the customers will not require you to solicit business or employees away from your former employer, you’re probably fine here, too.

I’ve reviewed and negotiated severance agreements for many years. I can’t remember seeing one that would prohibit you from working for a “customer.” It would be extremely rare.

By the way, just in case you do have a problem, since companies usually want their customers to be happy, they will often permit you to work for them, rather than make a fuss, even if you’ve signed something that says you won’t do that. You might ask for a waiver. If you do ask for, and are given, permission, MAKE SURE you get that permission in writing – an email dated AFTER the severance agreement is fine.

Read your agreements over carefully. If and when you do, the chances are high you’ll have no problem.

Good luck in your job search. We would love to hear whether your severance or non-compete / non-solicit agreements do pose a problem. We have a new “Feedback Invited” box on our homepage for just such feedback.

         Best, Al Sklover

P.S.: For those wanting personal attention and counsel, Al Sklover is available for Private Telephone Consultations on the subject of Non-Competition and Related  Restrictions on your working freedom. Choose 30-, 60-, or 120-minutes. If interested, just [click here.]

© 2010 Alan L. Sklover, All Rights Reserved.