Companies bringing lawsuits based on a noncompete or misappropriation of trade secrets routinely seek an injunction. For example, a former employer seeking to enforce a noncompete will often ask the court to block the former employee from working for a competitor.

Because an injunction is an equitable remedy—as opposed to a legal remedy, such as seeking money damages—the defendant is permitted to raise certain equitable defenses not available when the plaintiff is solely seeking money damages. This includes the defense of unclean hands, under which a plaintiff is not entitled to equitable relief—like an injunction—if it has acted inequitably or in bad faith. (Important point: these defenses can vary from state to state.)

So if the former employee can convince the court that the former employer acted inequitably, the injunction motion is likely to be denied. As part of their equitable defenses, defendants often argue that they were coerced into signing a noncompete, or that the former employer did not mention the noncompete until after the former employee had quit his prior job.

While it’s impossible to prevent a defendant from lobbing unfounded accusations, employers can take steps as part of the hiring process to circumvent these equitable defenses.

If an employer is going to require a noncompete or other restrictive covenant, inform prospective employees early in the hiring process. If there is a job posting, consider including this requirement. Of course, the employer needs to balance the risk of deterring applicants with the risk of increased difficulty obtaining an injunction. Consider giving prospective employees a handout at the initial interview describing the position and disclosing that any job offer will be subject to signing restrictive covenants. Certainly, any offer letter should make clear that it is subject to the employee entering into all required restrictive covenants.

Too often, companies assume that their restrictive covenants will automatically protect them, without thinking proactively about making sure that they are putting themselves in the best position to enforce these agreements down the road. Taking these simple steps can make a big difference if it becomes necessary to litigate.

1 Comment

  1. Nice article. Are you aware of cases where courts have found that failure to remind the employee of his noncompete until after he left his employment is deem to be inequitable conduct? Also, I assume that simply signing a noncompete as part of an employment package is not deemed inequitable per se. What are some examples of where a court has found “coercion” with respect to procuring a noncompete from an employee? Sign or your fired? Thanks.

    Michael

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