Defending a Non Compete Lawsuit
What To Do if You Have Been Sued for Violating a Non Compete Agreement |
Many employees in Massachusetts have signed non compete agreements, and many who have been in their jobs for a number of years may not even remember that they signed an agreement. So it can come as a surprise and a shock when you give your notice and accept a new job, only to find yourself on the receiving end of a lawsuit claiming you have violated your non compete. Non compete lawsuits usually include a request for immediate court action, called a request for preliminary injunction, so you may receive court papers with very short notice to appear in court and answer to the suit.
This can be extremely scary if you have never experienced it before, but we have been through it many times and we are here to help. |
Understanding the Court Papers You Received
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Most likely you received a document called a "summons," which states the amount of time you have to respond and a document called a "complaint" or a "verified complaint," which lays out the facts your former employer is claiming and their legal claims. In a non compete lawsuit, it is common also for the package to include a motion for a preliminary injunction, and a document called a "short order of notice" setting a date- usually a very short time away- for you to appear in court and "show cause" why the court should not issue an injunction.
If you are like most people who are not lawyers, up to half the words in the above paragraph made no sense to you. Translated, this is what they mean: Usually in a civil lawsuit, there is a complaint filed with the court, a period of time (usually 20 days) for the person being sued to file an answer, a lengthy period of time for the parties to discover relevant information from one another, and eventually, if the case is not settled, a trial at which a judge or a jury will decide if any money is owed between the parties. In the context of a non compete lawsuit, the plaintiff (your former employer) is seeking much more immediate relief, by way of a court order directing you not to take the competing position, or give it up if you have already started working. This is what is called a "preliminary injunction." The most important thing you need to understand is that you should seek the advice of an employment lawyer immediately, especially if you see paperwork requesting a preliminary injunction- you may have only a matter of days to put together a response and present your case to the court. |
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But Don't Panic- We Can Help
The good news is that while this may be new to you, it's not new to us. Here are the steps we take to address a non compete lawsuit and request for preliminary injunction.
First, we meet with you to assess your non compete agreement, as well as some information about your old job and your new job that will help us determine how likely it is that the court will enforce your non compete against you. You can read more about some available defenses on our non compete agreement page.
Second, we explore with you whether you have any potential legal claims against your employer. It may never have occurred to you to question whether you were paid everything you were owed, or whether there was anything about how you separated from your former employer that could be unlawful, but once you have been sued for something arising out of that employment relationship, you may have to raise any claims you have or lose your right to raise them in the future.
Third, we explore with you, and with the lawyers for your employer if appropriate, whether there is a resolution short of court action that would meet everyone's needs. For example, you may have a non compete that bars you from working in your industry at all for a period of time, but as a practical matter your employer may only be worried about a few key accounts or customers. In those situations, we are often able to settle the case early on with a specific agreement about not doing business with those customers for the non compete period.
Fourth, if we can't settle it we fight it. We have done this many times, and will walk you through the whole process. You may need to sign an affidavit, but the rest of the work assembling the documents, making the legal arguments, and addressing the court, is on our plate.
First, we meet with you to assess your non compete agreement, as well as some information about your old job and your new job that will help us determine how likely it is that the court will enforce your non compete against you. You can read more about some available defenses on our non compete agreement page.
Second, we explore with you whether you have any potential legal claims against your employer. It may never have occurred to you to question whether you were paid everything you were owed, or whether there was anything about how you separated from your former employer that could be unlawful, but once you have been sued for something arising out of that employment relationship, you may have to raise any claims you have or lose your right to raise them in the future.
Third, we explore with you, and with the lawyers for your employer if appropriate, whether there is a resolution short of court action that would meet everyone's needs. For example, you may have a non compete that bars you from working in your industry at all for a period of time, but as a practical matter your employer may only be worried about a few key accounts or customers. In those situations, we are often able to settle the case early on with a specific agreement about not doing business with those customers for the non compete period.
Fourth, if we can't settle it we fight it. We have done this many times, and will walk you through the whole process. You may need to sign an affidavit, but the rest of the work assembling the documents, making the legal arguments, and addressing the court, is on our plate.
Will Your Employer Get an Order Against You?
We obviously can't say without reviewing your situation what the chances are that you will have an order issued against you, but we can lay out some of the basic guidelines and principals to help you think about it.
Issuing an order, or an injunction, at the beginning of a lawsuit is considered extraordinary relief. In order to get an injunction, your employer will have to prove both that they are likely to win on their claims that your non compete is enforceable and you are violating it, and that they are in some immediate danger of suffering harm that can't be fixed down the road by an order of damages. This is called "irreparable harm" or "irreparable injury." In a non compete case, usually the employer is arguing either that they will be harmed by the disclosure of trade secrets or by damage to their goodwill with customers or prospective customers, and that one or both of these harms is too intangible to be easily addressed with money damages in the future.
Your defense, therefore, must be focused on undermining the merits of their case- the agreement is unenforceable, or not compliant with Massachusetts law, or the things your employer is trying to protect are not legitimate subjects of a non compete, or that the job you have taken does not fit within the terms of your non compete- or showing that they really are not in danger of suffering serious or irreparable harm.
Issuing an order, or an injunction, at the beginning of a lawsuit is considered extraordinary relief. In order to get an injunction, your employer will have to prove both that they are likely to win on their claims that your non compete is enforceable and you are violating it, and that they are in some immediate danger of suffering harm that can't be fixed down the road by an order of damages. This is called "irreparable harm" or "irreparable injury." In a non compete case, usually the employer is arguing either that they will be harmed by the disclosure of trade secrets or by damage to their goodwill with customers or prospective customers, and that one or both of these harms is too intangible to be easily addressed with money damages in the future.
Your defense, therefore, must be focused on undermining the merits of their case- the agreement is unenforceable, or not compliant with Massachusetts law, or the things your employer is trying to protect are not legitimate subjects of a non compete, or that the job you have taken does not fit within the terms of your non compete- or showing that they really are not in danger of suffering serious or irreparable harm.
Frequently Asked Questions
For most of our clients, being sued under a non compete agreement is a new experience, and they often don't know what questions to even ask at the beginning. Below are answers to some questions we have heard a lot from people in this situation.
Do I have to stop working/pause my new business? Not unless or until there is a court order telling you to. The complaint and whatever other papers you were served with are the plaintiff's (your former employer's) statement of why they feel they are entitled to the relief they are seeking. It is just the start of the process, and it is the court that makes the determination about what you can and cannot do under the agreement. That said, the earlier you consult with counsel the better, because there may be some changes it would be wise to make at the beginning to reduce your risk. For example, if you have any information belonging to your former employer, often we recommend turning that over to your lawyer to hold until the dispute is resolved, so that there can be no question about you using anything you shouldn't be using in your new endeavor.
Will I have to go to court? If your former employer has filed a motion for preliminary injunction, there will be a hearing scheduled, usually pretty quickly after the complaint is filed. Most of the time, however, the hearing will involve the court's review of affidavits and the arguments/presentations of the lawyer. It is rare that at this early stage you will have to appear and testify in court. It is also more often than not the case that once you have a lawyer involved, you can negotiate a resolution with your former employer before appearing in court. If this is not possible, however, and your case does go to a hearing, you should be able to rely on your lawyer to do the heavy lifting, present your defenses, and guide you through that process.
How can they stop me from working if they laid me off without cause? This is something many people struggle with. If your non compete agreement was signed before October 1, 2018, the unfortunate answer is yes, they can, provided the agreement is otherwise enforceable. The good news for many is that Massachusetts lawmakers have recognized the unfairness of that result, and for any non compete agreement signed after October 1, 2018, the restrictions cannot be enforced against you if your termination was not your fault.
Do they have to pay me something to stay out of work? Again, the answer to this question depends on when you signed your non compete agreement. Under the old law, employers did not have to pay anything for your tie out of work (though you most likely can collect unemployment benefits). If you signed your agreement after October 1, 2018, under most circumstances your employer has to pay you at least 50% of your highest earnings with them for the period of restriction under your agreement (for example, if you are prohibited from competing for 12 months, they have to continue paying you 50% of your salary for those 12 months).
Can I sue them for trying to stop me from working/doing business? That depends. On the one hand, your former employer has a right to enforce a contract, so you can't sue them just for doing that. On the other hand, if they are motivated not by a legitimate need to protect their business interests but instead by malice or spite, or if the way in which they have gone about this violates some other rule or law, it is possible that you would have what is called a "counterclaim," which is a claim against your former employer. We also sometimes find that there are independent employment law claims at play, under the wage and hour laws or anti discrimination laws, which can also be raised in the same proceeding. All of these are part of our initial review and assessment of your case.
How much will this cost me? Perhaps as scary as being sued in the first place is realizing that you have a new and unexpected expense in the form of legal fees. We can't make that go away, but will do everything we can to make it manageable for you. This includes offering the initial analysis and assessment at a flat rate, so that you know what to expect, and can make an informed decision about whether to fight the claim or try to resolve it, before you have spent a lot of money. If you choose to fight the claim, we can provide estimates for each stage of the work, and for each stage we give you the choice of being billed by the hour or paying a flat fee. This does not make the process free, but at least gives you some predictability. We may also be able to offer you a payment plan for legal fees, depending on the circumstances.
What if I don't want to fight this? This is a 100% fair question, given the real costs of defending yourself in court. Maybe the new job you took just isn't worth the hassle. In most cases, if that is your decision you can reach an early settlement with your former employer by simply agreeing not to do whatever it is they don't want you doing for the period of the non compete. We still recommend using an attorney to broker such a settlement, to make sure that if you are giving up something to resolve it you are truly buying peace and the lawsuit is dismissed.
This claim is frivolous- can I make them pay my attorneys' fees? If your non compete agreement has a provision that says the winning party in a lawsuit is entitled to attorneys' fees, then yes. Otherwise, unfortunately, the "American Rule" in civil litigation is that each party is responsible for their own fees no matter who wins. But part of our review of your defenses in a non compete lawsuit is a review of claims you may have against your former employer. If you have any claims that arise under statutes that provide for attorneys' fees (for example, wage and hour or discrimination and retaliation claims), there may be a way to recover at least some of the fees at the end if you are successful.
Do I have to stop working/pause my new business? Not unless or until there is a court order telling you to. The complaint and whatever other papers you were served with are the plaintiff's (your former employer's) statement of why they feel they are entitled to the relief they are seeking. It is just the start of the process, and it is the court that makes the determination about what you can and cannot do under the agreement. That said, the earlier you consult with counsel the better, because there may be some changes it would be wise to make at the beginning to reduce your risk. For example, if you have any information belonging to your former employer, often we recommend turning that over to your lawyer to hold until the dispute is resolved, so that there can be no question about you using anything you shouldn't be using in your new endeavor.
Will I have to go to court? If your former employer has filed a motion for preliminary injunction, there will be a hearing scheduled, usually pretty quickly after the complaint is filed. Most of the time, however, the hearing will involve the court's review of affidavits and the arguments/presentations of the lawyer. It is rare that at this early stage you will have to appear and testify in court. It is also more often than not the case that once you have a lawyer involved, you can negotiate a resolution with your former employer before appearing in court. If this is not possible, however, and your case does go to a hearing, you should be able to rely on your lawyer to do the heavy lifting, present your defenses, and guide you through that process.
How can they stop me from working if they laid me off without cause? This is something many people struggle with. If your non compete agreement was signed before October 1, 2018, the unfortunate answer is yes, they can, provided the agreement is otherwise enforceable. The good news for many is that Massachusetts lawmakers have recognized the unfairness of that result, and for any non compete agreement signed after October 1, 2018, the restrictions cannot be enforced against you if your termination was not your fault.
Do they have to pay me something to stay out of work? Again, the answer to this question depends on when you signed your non compete agreement. Under the old law, employers did not have to pay anything for your tie out of work (though you most likely can collect unemployment benefits). If you signed your agreement after October 1, 2018, under most circumstances your employer has to pay you at least 50% of your highest earnings with them for the period of restriction under your agreement (for example, if you are prohibited from competing for 12 months, they have to continue paying you 50% of your salary for those 12 months).
Can I sue them for trying to stop me from working/doing business? That depends. On the one hand, your former employer has a right to enforce a contract, so you can't sue them just for doing that. On the other hand, if they are motivated not by a legitimate need to protect their business interests but instead by malice or spite, or if the way in which they have gone about this violates some other rule or law, it is possible that you would have what is called a "counterclaim," which is a claim against your former employer. We also sometimes find that there are independent employment law claims at play, under the wage and hour laws or anti discrimination laws, which can also be raised in the same proceeding. All of these are part of our initial review and assessment of your case.
How much will this cost me? Perhaps as scary as being sued in the first place is realizing that you have a new and unexpected expense in the form of legal fees. We can't make that go away, but will do everything we can to make it manageable for you. This includes offering the initial analysis and assessment at a flat rate, so that you know what to expect, and can make an informed decision about whether to fight the claim or try to resolve it, before you have spent a lot of money. If you choose to fight the claim, we can provide estimates for each stage of the work, and for each stage we give you the choice of being billed by the hour or paying a flat fee. This does not make the process free, but at least gives you some predictability. We may also be able to offer you a payment plan for legal fees, depending on the circumstances.
What if I don't want to fight this? This is a 100% fair question, given the real costs of defending yourself in court. Maybe the new job you took just isn't worth the hassle. In most cases, if that is your decision you can reach an early settlement with your former employer by simply agreeing not to do whatever it is they don't want you doing for the period of the non compete. We still recommend using an attorney to broker such a settlement, to make sure that if you are giving up something to resolve it you are truly buying peace and the lawsuit is dismissed.
This claim is frivolous- can I make them pay my attorneys' fees? If your non compete agreement has a provision that says the winning party in a lawsuit is entitled to attorneys' fees, then yes. Otherwise, unfortunately, the "American Rule" in civil litigation is that each party is responsible for their own fees no matter who wins. But part of our review of your defenses in a non compete lawsuit is a review of claims you may have against your former employer. If you have any claims that arise under statutes that provide for attorneys' fees (for example, wage and hour or discrimination and retaliation claims), there may be a way to recover at least some of the fees at the end if you are successful.
How slnlaw Can Help
We have years of experience representing people in non compete lawsuits in Massachusetts state and federal courts, and we would be happy to help. You can use the button below to schedule a call back from a member of our team, give us a call at 781-784-2322, or fill out our web form to let us know a little more about your situation.
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