Trade Secrets Archives

“Injunctive Relief” Clauses in Contracts – What Do They Mean?

Published on December 13th, 2016 by Alan L. Sklover

 
“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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Injunction – Key Words & Phrases

Published on August 14th, 2014 by Alan L Sklover

Key Words

What is the meaning of:

“INJUNCTION”?

An “injunction” is a Court order that requires a person to either (a) do, or (b) stop doing, a specific action.

It is considered an extraordinary judicial remedy because it extends the power of the Court into the lives of people in a way that is much more intrusive that would be a verdict for monetary damages. In fact, if a person fails to comply with a Court’s injunction, he or she can be held in “contempt of court,” and even jailed.

In general, there are two kinds of injunctions: “Preliminary” or “Permanent.” A “Preliminary” injunction is commonly requested at the very beginning of a lawsuit when someone claims to the Court “it is essential that we protect the status quo. We cannot wait years until the end of this lawsuit, or greater – perhaps irreparable – damage will be done.” If granted, a preliminary injunction lasts only until the end of the lawsuit.

For example, if an employer has reason to believe that an employee has stolen a secret and valuable recipe or chemical formula, it might ask the Court to issue a Preliminary Injunction at the beginning of a lawsuit regarding this issue.

Because Preliminary Injunctions are requested before the Court knows all of the facts – not just the employer’s version of the facts – the Court will require a strong showing of evidence before agreeing to issue the requested injunction.

At the end of a lawsuit, if the person bringing the lawsuit is found deserving of long-term protection, then a “Permanent” injunction may be issued by the Court, to remain in force indefinitely.

We are often involved in cases involving injunctions when an employer seeks to stop a former employee from allegedly stealing secrets or violating a non-compete agreement.

To obtain a copy of our 185-Point Master Guide & Checklist to Non-Compete’s, just [click here.] 

Fortunately, through “self-help,” non-compete agreements can be “navigated,” negotiated, defended against, and, quite often, defeated. That takes some knowledge, insight and perspective on restrictive covenants.

We provide Model Letters for your Self-Help to address issues of Non-Compete Agreements and other restrictions. Just [click here] and see Section M [Non-Compete Agreements and Other Restrictions.]    

To learn more about these matters, simply [click here.]  

© 2014 Alan L. Sklover. All Rights Reserved. Commercial Use Strictly Prohibited

Restrictive Covenant – Key Words & Phrases

Published on January 29th, 2014 by Alan L Sklover

Key Words

What is the meaning of:

Restrictive Covenant?

Quite simply, a “Restrictive Covenant” is a “Promise to Limit Future Freedom.”

The most common examples of restrictive covenants are (a) promises not to work for your employer’s competitors in the future (“non-compete” agreements), (b) promises not to solicit business from your employer’s customers in the future (“non-solicitation” agreements), and (c) promises not to hire your employer’s employees in the future (“no hire” agreements.”)

In addition, promises not to share confidential or proprietary information belonging to your employer (“confidentiality agreements”) are also kinds of restrictive covenants.

You need to take all restrictive covenants seriously for two important reasons: (i) First, prospective employers may decide not to hire you if your anticipated duties might result in an allegation of violation of one of these agreements, because the prospective employer would fear it could be involved in a lawsuit. (ii) Also, ignoring the potential impact of a restrictive covenant could involve you in a lawsuit, which would inevitably be disruptive or harmful to your career.

Fortunately, restrictive covenants can be “navigated,” negotiated, defended against, and, quite often, defeated. That takes some knowledge, insight and perspective on restrictive covenants.

To help you help yourself, we provide that to you on our blogsite. To learn more about these matters, simply [click here.]

© 2014 Alan L. Sklover. All Rights Reserved. Commercial Use Strictly Prohibited

Can You Share Company Secrets With Your Lawyer?

Published on April 10th, 2012 by Alan Sklover

“To keep your secret is wisdom;but to expect others to keep it is folly.”

Samuel Johnson

ACTUAL CASE HISTORIES*Rena consulted our firm with an unusual question: “Am I permitted to share my employer’s confidential information with my attorney in order to get legal advice?” Rena’s question was interesting, but the reason she asked it was more interesting.

As Corporate Controller, Rena was responsible for direct supervision of all accounting and financial functions of her corporate employer. She was also part of a team that created and implemented policies and procedures to identify, resolve and document accounting issues. One day, Rena came upon an email that made her believe that her employer was using an improper accounting treatment regarding payments made to overseas Consultants. She did some internal research, and then raised her concern with the Office of the General Counsel (that is, her employer’s chief lawyer.)

For the first time in Rena’s six years with the company, she noticed that she was being left out of meetings, isolated from others she usually worked with, and denied information necessary to do her job. Soon after that, her direct supervisor accused her of “sloppiness in thinking,” without any specifics or explanation. She felt what was happening to her violated her employer’s anti-retaliation policy. And so she retained an attorney to help her resolve the problem. She showed her attorney the email in question, and her employer’s anti-retaliation policy, and, too, internal reports of payments made to the Consultants.

As often happens, Rena’s attorney wrote to her company’s General Counsel, and in his letter quoted the email, the anti-retaliation policy, and the internal reports. The next day – without warning – Rena was fired and escorted out of the building for “gross misconduct,” identified as her sharing with her lawyer the company’s secrets, which he had inadvertently confirmed in his own letter to the company. It was characterized as a breach of the Company’s Confidentiality policy which forbids “sharing or divulging any Confidential Information with any person outside the Company.” For a Corporate Controller, this was a devastating career blow. It also resulted in Rena’s loss of all of her stock options, any bonus for the present fiscal year, and even the right to collect Unemployment Benefits. Ouch!

Rena was aghast and perplexed; her attorney was irate. Rena came to us for a second opinion.

Rena was not happy about what we told her. Her attorney was even more upset.

LESSON TO LEARN: Employers have a legitimate need and a legal right to make sure that their “confidential information” is kept secret, because confidential information about a company that gets out can be used by its competitors to help them compete against it. The many types of “Confidential Information” are almost limitless, and can include information (as well as documentation) about a company’s (a) customers, (b) strategic plans, (c) formulas, (d) unique business methods, (e) employees, (f) vendors, and (g) finances, just to name a few. Efforts to maintain confidentiality are entirely proper, provided however that the efforts, the information and the manner of enforcement are, themselves, proper.

“Confidential Information” does not include (i) information that is publicly available, such as the location of a company’s offices, or (ii) information that the company, itself, has disseminated outside the company, such as statements included in advertisements. Nor does “confidential information” include (iii) information with no value, such as the fact that the company employs both women and men.

Many employers require that their employees sign a written Confidentiality Agreement. Some employers have written Confidentiality Policies in their Employee Handbooks. Whether or not Confidentiality Agreements have been signed, or written Confidentiality Policies have been disseminated, the law views all employees as having a duty of confidentially as one part of all employees’ larger duty of loyalty to their employers.

Here is a common Confidentiality provision:

“The Employee promises to maintain strict confidentiality of the Employer’s Confidential Information, both during and after his or her employment. Confidential Information means information about the Employer, its business, and its customers, customer prospects, vendors, other employees and investors which is not generally known outside Employer, which Employee learns of in connection with his or her employment by the Employer, and which might prove advantageous to the Employer’s competitors. Confidential Information includes: “(1) Employer’s business plans, policies and finances; (2) Employer’s financial projections, including without limitation as to annual sales forecasts, computations and marketing plans; (3) customized software, marketing techniques, production methods; and (4) identity of former, present and targeted customers, vendors, investors and employees.”

When reading that Confidentiality provision, did you notice any exception for sharing confidential information or documentation with your attorney? Of course not, because none exists. It is for this simple reason that an employee’s sharing confidential information or documentation with his or her attorney is a violation of required Confidentiality, and thus could be considered gross misconduct worthy of immediate firing for “cause,” as happened to Rena.

“But,” you might say, “How can I get necessary legal advice on employment-related issues if I can’t share confidential information and documentation with my attorney?” The answer is: You need to be able to do that, and it is fine to do that, but neither you nor your attorney should ever admit that you have done that, and the law says that is OK.

You see, everything you share with your attorney, and your attorney shares with you, is “privileged and confidential,” and neither you nor your attorney should ever disclose what it was that was shared between you and him or her. That includes spoken communications, written communications and digital communications, and sharing of documents, too. This rule of “privilege” is an absolute one, and an important one, and one that many people don’t keep in the forefront of their minds.

The Lesson to take away is this:

“It is a violation of your confidentiality obligations to your employer for you to share with your attorney information or documentation that is confidential. However, if you do share such information or documentation with your attorney, neither you nor your attorney should ever admit that you have done so, because the law protects all attorney-client communications, even if you are under oath. In response to any question about this, just say, “I don’t share what I discussed with my Legal Counsel.”

Sadly, it was Rena’s attorney who “spilled the beans” – or, more accurately, disclosed what should have been held in confidence between Rena and him – in his letter to her employer’s General Counsel. That error was most fundamental – and damaging – and totally unnecessary.

WHAT YOU CAN DO: When obtaining legal counsel on employment matters, bear this lesson in mind, and it might be wise to remind your attorney of it, as well. Here are some other pointers to assist you in this process:

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“Can I Work for a Licensee or Vendor of my Former Employer?”

Published on May 20th, 2010 by Alan L Sklover

Question: I was employed by a large U.S. corporation. Three years ago I received a settlement offer from them for having been sexually harassed. In the settlement agreement, it did not mention the sexual harassment, but it did mention that I had to release all of my claims against the company. I left the company at that time.

Recently, one of their licensees – a company in another country that has an agreement with my former employer to use my employer’s brand on things the licensee manufactures and sells contacted me.  I had worked with them while I was with my former employer. The licensee asked me if I was interested in freelance / contract work.

I checked my settlement agreement, and could not find anything that said I could not work for the licensee. Would it be OK for me to work for the licensee as an independent contractor, or would that be either a conflict of interest, or a violation of the settlement agreement? 

 Linda 
 New York, New York

Answer: Linda, for several reasons I am confident that your working for the licensee – as an employee or as an independent contractor – should not present you with a problem of any kind.

First, even if your settlement agreement with your former employer said or implied that you could not work for the licensee, the passage of three years’ time would almost definitely make any such restriction unenforceable. Such “restrictive covenants” or “non-compete’s” rarely exceed two years in duration.

Second, it is possible that in your settlement agreement there are provisions that require that you keep certain “trade secrets” and other company information  confidential, but here again, the passage of three years would quite likely make any information you had quite “stale” and therefore of no value.

Third, there is no “conflict of interest” involved in your working for the licensee. For a conflict of interest to exist, you would need to have some obligation to your former employer that might “tug you both ways,” or require “loyalty to two different masters.” I don’t see any facts or circumstances that would make a “conflict of interest” exist here. If you want to read a Newsletter I wrote on the subject of Conflicts of Interest [click here]. You can also find it on our Blog Library, under the Section Entitled “Disputes and Resolving Them.”

Hope that helps. My best to you.

         Best, Al Sklover  

P.S.: Want to learn more of this “good stuff” regularly? You can Receive Each of Our Blog Posts Automatically, Free, By Email if you just [click here.] And we promise: we never sell, lease or let anyone see our subscriber list. Never, ever.

 © 2010 Alan L. Sklover, All Rights Reserved.


Alan L. Sklover

Alan L. Sklover

Employment Attorney
and Career Strategist
for over 35 years

Job Security and Career Success now depend on knowing how to navigate and negotiate to gain the most for your skills, time and efforts. Learn the trade secrets and 'uncommon common sense' of Attorney Alan L. Sklover, the leading authority on "Negotiating for Yourself at Work™".

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