The enforcement of a restrictive covenant hinges upon a breach by a former employee of the contractual obligations outlined in the agreement. An employer may seek relief if a former employee engages in activities expressly prohibited by a non-compete agreement that could potentially harm the employer. A violation of a non-compete agreement by a former employee constitutes a breach, allowing the employer to enforce the agreement. Additionally, employers may seek relief if the former employee threatens to breach the agreement, entitling them to injunctive relief from the court to prevent any breach irrespective of the extent of potential damage.
Injunctive Relief
To secure an injunction against a former employee and enforce a non-compete agreement, the employer must demonstrate both a breach and incurred or imminent irreparable harm. Breach alone does not suffice for the issuance of an injunction, and courts have maintained that "a party seeking a temporary injunction must first establish irreparable harm." The Supreme Court of the United States has rarely addressed non-competes but reaffirmed the traditional standard for injunctive relief in Doran v. Salem Inn, Inc., stating it "requires the plaintiff to show that in the absence of its issuance he will suffer irreparable injury and also that he is likely to prevail on the merits." Therefore, the plaintiff must prove incurred or imminent irreparable harm from the activities of a former employee deemed as a contractual breach.
Courts may encounter unique circumstances when assessing whether a party has violated the terms of a non-compete agreement, necessitating further legal analysis. These circumstances can include actions that straddle permissible and impermissible activities, evaluating the similarities between former and new employment, and determining the permissibility of working for a former client after leaving the employer.
Questions of Degree
Courts often face two typical situations requiring determination of prohibited conduct, leading to a breach of a non-compete agreement: (a) defining "competing business activity" and (b) assessing permissible engagement within the restricted geographic area. Some defendants argue that mere "marketing" does not constitute a "competing business activity" violating a restrictive covenant. However, marketing is considered a "competing business activity" under non-compete agreements, encompassing both the actual sale of products or services and efforts to promote and facilitate such sales. Furthermore, courts have determined that non-competitive activities may become competitive if they result in a competing activity. When engaging in activities within the prohibited geographic region, even if the new employer's business location does not explicitly violate the agreement terms, courts have routinely found it constitutes a breach. Contracts focusing on employment activities evaluate competing activities of former employees rather than the employee's new office location.
When evaluating whether prior and current employment are similar, courts may weigh this aspect in determining a breach's occurrence. Employment with a direct competitor does not necessarily lead to a breach if substantial differences exist between the old and new positions. The burden is on the plaintiff employer to prove likely success on the case merits and demonstrate that the former employee will offer "similar services" to the new employer, resulting in unfair economic activities. To obtain injunctive relief, the plaintiff must present evidence showing occupational similarities and how the new employment has or is likely to lead to a breach.
Former Clients
Non-compete agreements often spark controversies regarding whether they prevent an employee from working for a former client previously associated with the prior employer. Courts have dismissed the notion that restrictions extend to former clients, concluding employers are not entitled to enforce non-compete agreements on these grounds. Injunctive relief focused on breach prevention aims at former employees working for competing companies, rather than former clients. In Connecticut, courts will deny injunctive relief when "such relief appears to be more logically directed to an employee engaged in a competing business than to an employee accepting employment not with a competing business, but a former client." The state rule dictates that, unless specifically prohibited in the non-compete agreement, working for a former client does not breach the contract terms.
The Parol Evidence Rule
A significant principle relevant to covenant enforcement is the Parol Evidence Rule, which may bar evidence outside the contract's written scope concerning matters incorporated within the finalized document. This rule prohibits evidence that varies or contradicts contract terms from the finalized agreement. During litigation on enforcing a non-compete, parties often cannot provide collateral evidence contradicting the written restrictive covenant. Courts recognize finalized restrictive covenants, disallowing conflicting evidence while allowing supplemental evidence solely to clarify ambiguous contract provisions. Contracts are deemed "final agreements" in the absence of evidence contravening the intention of the parties for the writing to serve as their final expression.
Contact Us
If you have any questions about enforcing a non-compete agreement, or wish to consult an attorney regarding a legal matter, please contact Joseph C. Maya and the attorneys at Maya Murphy, P.C. at (203) 221-3100 or Jmaya@mayalaw.com to arrange a free initial consultation.
