5 Vital Steps when an Ex-Employee Violates a Restrictive Covenant Agreement

restrictive covenant agreement violations

Restrictive covenants are an essential way to protect a company’s most valuable assets, such as its employees, clients, and confidential information. Therefore, if a former employee disregards these legal agreements, it can pose a substantial threat to the business. Knowing how to respond quickly and strategically is very important, and working with an experienced business attorney can make all the difference in protecting your interests.

What is a Restrictive Covenant?

A restrictive covenant is a clause that is often included in an employment contract, and places limits on what an employee is legally allowed to do while employed, as well as after they leave the company, in order to protect the interests of the employer.  Common types of restrictive covenants include:

  • Non-Compete Agreement – this type of agreement prevents an employee from going to work for a competitor or from starting a competing business within a specific location and period of time.
  • Non-Solicitation Agreement – this states that a former employee may not contact customers, vendors or co-workers in an attempt to bring them to their new company.
  • Confidentiality/Non-Disclosure Agreement (NDA) – this agreement states that an employee is not allowed to share any confidential, sensitive or proprietary company information with others. This could include trade secrets, business plans or processes, product formulas, company strategy and more.

Steps to Take When a Restrictive Covenant has been Violated

If a former employee violates a restrictive covenant, it can result in serious damage to a company, including lost revenue or irreparable harm to client relationships. That’s why it’s vital to take quick, legally sound action.

  • Gather evidence – The first step is to confirm that a violation has actually occurred. This could involve monitoring client activity, employee departures, or competitor conduct. Collect emails, contracts, or witness statements – anything that clearly demonstrates the restrictive covenant was breached.
  • Review the agreement with your attorney – Restrictive covenants must be drafted carefully in order to be enforceable. In fact, courts typically pay close attention to confirm that the terms are reasonable. Our attorneys can review the agreement and assess whether it is enforceable under state law before pursuing any action.
  • Send a cease-and-desist letter – Sending a cease-and-desist letter to the former employee, or even their new employer, is often an effective way to get immediate results. This letter serves as a formal notice of the breach and gives them an opportunity to stop the prohibited activity before litigation becomes necessary.
  • Consider all options for resolving the dispute – Not all cases require immediate litigation. Mediation or arbitration may provide a quicker, less costly solution if the agreement requires or allows it. Our experienced attorneys can help evaluate whether pursuing alternative dispute resolution is in your company’s best interest at this stage.
  • Take it to court when necessary – If the violation continues, litigation may be unavoidable in order to stop the behavior and recoup the monetary losses that the company has incurred.

Working with Churchill, Quinn, Hamilton & Van Donselaar, Ltd for a Restrictive Covenant Dispute

Restrictive covenant violations can put a business at risk, but not every agreement is enforceable, and not every breach warrants the same response. Our skilled business attorneys bring the legal insight necessary to:

  • Evaluate whether the covenant itself can stand up in court
  • Recommend strategic, cost-effective actions at each stage
  • Protect your business’s reputation, interests and assets

If a former employee has put your company in a challenging situation, contact us at 847-223-1500 to schedule a consultation and begin the process of reaching a successful resolution.