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I Was Sued For Breaching My Noncompete – What Now?

| Jan 24, 2019 | Areas of Practice, non competition disputes |

I was fired today after I reported dangerous conditions to HR.

Best Ohio No Competition Contract Lawyer Reply: What can my former boss do if I violate my non-compete agreement? What could happen to me if I violate if a violate my covenant not to compete by going to work for a competitor? How do I get out of my non-compete contract?

“What the hell did I agree to?” Most new employees, likely very happy to have a new job with a world of growth and potential in front of them, will sign anything. These include non-compete agreements, covenants not to compete, no competition contract, non-solicitation agreements, contracts to limit or prevent your ability to file lawsuit against the employer, and many other interesting provisions or agreements. Employers, backed by their team of high priced employment lawyers, have drafted a whole bunch of documents to be signed. Often these agreements are shoved in between payroll paperwork, handbook acknowledgements or health insurance applications. Many times, employers will at least be honest and direct in telling the new hire that they always require these terms, or the boss will say that it is industry standard. The new employee, having already left his or her prior job, usually has very little leverage but to agree. In a perfect world, these terms or contacts would be part of the initial offer letting the employee agree, reject, or negotiate on more equal footing. But, that never happens, and I have never heard of a candidate for a job ask for any such contract or provisions shoved into a handbook before accepting a position (while it may be brilliant to do so). That being said, the employer can pull the offer or fire you if you refuse to sign once you have started. (Can I Be Fired If I Refuse To Sign A Non-Compete Agreement? Best Lawyer Reply!).

The consequence of this is that most employees have no idea of what their full obligations and liabilities are when their employment ends. This is especially true if the employee leaves a job after being at that employer for a lengthy period. “I know I signed something, but that was like 10 years ago.” And, good luck trying to find a copy in your filing cabinet or packed into a box in your basement. Now, some employers will remind you of some of the terms of the commitment that you made way back in the honeymoon period, but some will just lie in waiting, waiting until you screw up and come after you.

Today, our employment law attorneys will be focusing on just one small aspect of a no-compete contract or non-competition agreement to show that the devil is in the details. If you landed here wonder whether your former boss or the evil owner of the company you just left can enforce a non-compete contract against you or to what extent, here are a few links to some of our employment law attorneys’ prior blogs on that subject. (Will A Court Uphold My Non-Compete If My Former Employer Sues Me? I Need A Lawyer!; Is My Non-Compete Agreement Enforceable If I Was Fired? I Need An Employment Lawyer!; Is A No-Compete Contract Enforceable If I’m A Single Mom And Can’t Get A Job Because Of It? Best Attorney Reply!). But, by way of a quick refresher, Ohio generally allows employers to use non-compete contracts to reasonably protect themselves from employees taking what they learned in terms of business processes, contacts, pricing information, and setting up shop so close the former employer as to disrupt or steal business. The key word is reasonably. In Ohio, the employer can only limit the amount of time and distance to reasonably protect themselves. This means that an employer cannot preclude a former employee from working within a 300-mile radius of any of its locations for five years. However, if reasonably drafted, an employer can use a non-competition agreement or covenant not to compete to get an injunction against the former employee to prevent that employee from continuing to work and can get damages that flow from the violation of the non-compete contract – such as lost business profits. But, that is not all, which brings us to our current example case.

Just this month, the Sixth Circuit Court of Appeal, which covers appeals from federal district courts in Ohio, Kentucky, Michigan, and Tennessee, decided Kelly Services, Inc. v. De Steno. In this case, three former employees of Kelly Service, a staffing and consulting company, quit and only days later went to work for a competitor for what appeared to be the same type of position in the same market. Upon hearing the news, the employer whipped out the non-compete agreement and told them to knock it off. The employees refused and guess what happed … the employer filed a lawsuit.

After presenting evidence that these three former employees actually solicited business from Kelly’s clients, the trial court granted a preliminary injunction precluding the defendants from working at their new jobs because “because the agreements are reasonable, and the Defendants have almost certainly violated them, Kelly has demonstrated a likelihood of success on the merits.” The trial court made the temporary injunction indefinite until the conclusion of the case, which actually took longer than the one year provided for in the non-compete contract that each of the three employees originally agreed to. Justice grinds slow. Court cases take time. Presumably, each of these employees had to eat, pay rent or a mortgage, pay for their car, etc. Given this time, I further presume that these three defendants eventually just got different jobs because they stopped challenging the injunction, and the only issue remaining was damages. On this point, the non-competition contracts provided:

If I break this Agreement, Kelly is entitled to recover as damages from me the greater of the amount of the financial loss which Kelly suffers as a result or the amount of the financial gain which I receive. I will pay Kelly’s reasonable attorney’s fees and costs involved in enforcing this Agreement.

6. Remedies/Damages. I agree that the Company’s remedies at law for any violations of this Agreement are inadequate and that the Company has the right to seek injunctive relief in addition to any other remedies available to it. Therefore, if I breach this Agreement the Company has the right to, and may seek issuance of a court ordered temporary restraining order, preliminary injunction and permanent injunction, as well as any and all other remedies and damages, including monetary damages. I further agree to pay any and all legal fees, including without limitation, all attorneys’ fees, court costs, and any other related fees and/or costs incurred by the Company in enforcing this Agreement.

Now, because the preliminary injunction happened so quick, there was not a lot of monetary damages to Kelly and the three former employees had not earned much. So, what damages were worth arguing about? Go back and re-read the contract provisions. See the parts about paying “all attorneys’ fees, court costs, and any other related fees and/or costs incurred by the Company in enforcing this Agreement”? So, according to these terms, the longer the former employees fought, the more attorneys’ fees they had to pay – and don’t forget that they were paying for their attorneys’ fees during this process as well. Based on these provisions, the trial court ordered these three former employees to pay their former employer $72,182.90 to cover attorneys’ fees.

To me, this highlights why the best course of action when confronted with a threat of suit for breach of a non-competition agreement is to get good competent legal advice from an employment law firm, and then listen to it. Look, I don’t know if these former employees got bad legal advice or refused to follow good advice that they were give. It is worth it to spend a little money to have an employment attorney review the contracts at issue and tell you what your options are. Sometimes an employer will negotiate by either reducing the non-compete period or by requiring a monetary buy out of the covenant not to compete contract in order to avoid the time, hassle, and potentially the cost of litigating. Some employers will realize that taking these matters to litigation will end up as a public matter that may hinder their ability to hire future employees, who tend not to want to go to work for a boss that will turn around and sue them. So, there is room to possible negotiate. Now, most employers won’t take such attempts to negotiate seriously unless backed by a respected employment attorney, and preferably a firm with serious resources. That being said, the former employees must be willing to significantly compromise from being free at no cost. And, when faced with an unreasonable or entrenched former employer, there is no shame in waiving the white flag and agreeing to stop the competition or even agree to reset the non-compete period in order to avoid costly litigation that the employee is most likely going to lose. When there are two options, (a) losing early by having to find another job, or (b) losing after a year or more of costly litigation and still having to find a new job, choose (a) every time.

Indeed, the non-compete violators three had such a weak case, that they argued on appeal that they should not have pay attorneys’ fees since Kelly was not the prevailing party because it did not receive a final judgment on the injunction because they eventually gave up and it was not necessary. The United States Court of Appeals for the Sixth Circuit was having nothing of it:

Kelly brought an action to enforce the employment agreements, the district court granted Kelly’s request for a preliminary injunction, and the defendants were prohibited from working for an alleged competitor for one year, the full scope of injunctive relief available under the employment agreements. Kelly’s attorneys’ fees in this case were, under a plain reading of the contracts, “involved” or “incurred” “in enforcing” these agreements, and therefore, under a plain reading of the contracts, Kelly is entitled to have the defendants pay those fees. … The contracts by their terms do not require a final determination of liability in favor of Kelly as a condition for the award of fees. Unlike numerous similar agreements, these contracts do not employ the words “prevailing party,” nor by their literal language do they require a final determination of liability.

The United States Court of Appeals for the Sixth Circuit did, however, limit the holding of the trial court. While the trial court held that any time an employer just sought to enforce the non-compete provisions, the employees had to pay its attorneys’ fees and costs. Specifically, the Court of Appeals held:

In reasoning that a final determination of contract breach was not required, the district court may have stated too freely that the contract required former employees to pay attorneys’ fees “if [Kelly] merely sought to enforce the contracts.”  One can imagine cases where efforts to “seek enforcement” could for instance be unreasonable, made with little or no basis, or made for purposes of oppression or harassment, or could be simply unsuccessful. A court might read the words “reasonable . . . fees . . . involved in enforcing” and “fees . . . incurred . . . in enforcing this Agreement” not to extend to such situations. We do not address the possibility of such a limited interpretation, however, because the record is clear that none of these situations is present in this case. The district court entered a preliminary injunction that resulted in substantial relief, based on a determination that Kelly had shown a strong likelihood of success on the merits. Indeed, defendants withdrew their appeal from the grant of that relief. None of the imagined oppressive or unreasonable situations has occurred here. The contracts accordingly clearly provided for recovery of attorneys’ fees.

I guess that is a limited win for employees, but it certainly did not make these three feel any better. Indeed, now I’m left wondering how much more that they spent on the appeal and if they will have to pay Kelly’s attorneys’ fees.

If you have found yourself asking, “is my non-compete agreement enforceable?” — or even think that you might need an employment lawyer, then it would be best to call the right attorney to schedule a free and confidential consultation at 866-797-6040 to discuss your non-competition agreement. The Spitz Law Firm and its attorneys are experienced and dedicated to protecting employees’ rights and solving employment disputes over these types of contractual no-compete agreement.

Disclaimer:

The materials available at the top of this page and at this employment law website are for informational purposes only and not for the purpose of providing legal advice. If you are trying to figure out “is my non-competition agreement enforceable,” or “how do I get out of a non-compete agreement,” it would be best for to contact an Ohio attorney to obtain advice with respect to your particular employment law issue or problem. Use and access to this employment law website or any of the links contained within the site do not create an attorney-client relationship. The legal opinions expressed at or through this site are the opinions of the individual lawyer and may not reflect the opinions of The Spitz Law Firm, Brian Spitz, or any individual attorney.