Am I Going to Get Sued for Breach of Non-Compete and What Does That Look Like?

Are you going to get sued for a breach of your non-compete?  Maybe, depends on what you do.  Below is a thumbnail sketch of

In most instances, a good rule of thumb is to “follow the money.”  If an employee moves from Company A to Company B and, as a result, Company A continues to chug along as normal, a lawsuit is very unlikely.  On the other hand, if, as a result of the employee’s move to a competitor, Company A loses money, a lawsuit is more likely.  This is why, for the most part, where we see lawsuits over non-competes, these happen when an employee leaves and takes a big book of business out the door.

Non-compete lawsuits tend to “follow the money” because every civil lawsuit has two phases:  liability and damages.  Liability is legal responsibility for one’s actions and/or omissions. In the context of non-competes, an employee is “liable” for breach of a non-compete if he/she violate the terms of the non-compete (i.e. works for a competitor during the prohibited timeframe, geographic area, etc.).  If a plaintiff can establish liability, the next phase is damages.  Basically, damages are the amount of harm plaintiff suffered as a result of defendant’s actions.  Thus, if as Company A continues to chug along after an employee moves to Company B (even if Company B is a direct competitor), Company A has suffered no damages and would not likely recover much by way of a lawsuit (while expending money and resources on a lawsuit).  From Company A’s perspective, a lawsuit against a departing employee, even if he/she breached their agreement, is a losing perspective.

Nevertheless, this does not guarantee that an employer will never seek legal action against a departing employee for breach of a non-compete.  Where employers do pursue this course of action, it typically proceeds as follows:  (1) cease and desist letter, (2) application to the court seeking an injunction, and (3) a lawsuit seeking damages and other relief.  Let’s discuss each step in turn.

  1. The Cease and Desist Letter.  This is not a legal action.  It is a threat letter from a lawyer.  The threat is that if you do not “cease and desist” (in layman’s terms – “stop”) doing something – like working for a competitor – your former employer will sue you.  Most of the time, the matter ends there.  Often the parties can work things out short of legal action.  And, very frequently, your former employer is just bluffing.
  2. The Application for an Injunction.  Unlike a cease and desist letter, if your former employer is seeking an injunction, this is in a court of law.  An injunction is a court order requiring you to do (or not do) something – like work for a competitor. Injunctions are very difficult for employers to obtain.  This is because, in order to convince a court to order an injunction, the employer has to show that, if the court does not issue an injunction, the employer will suffer “irreparable harm.”  This is a high burden, especially in light of the fact that monetary damages alone do not prove irreparable harm. Because of this, employers rarely seek injunctions. And, in the rare instances where they do, after the court issues or denies the injunction, most employers stop and do not pursue a legal action for damages.
  3. Lawsuit for Damages.  This is an ordinary lawsuit.  The employer will assert that by virtue of your breach of the non-compete agreement, it suffered damages.  It is the employer’s burden to prove (a) that you breached the agreement and (b) that it suffered damages as a result.  If it does, it recovers those damages.

Questions, comments, just want to chat with lawyers?  Call or e-mail us any time.  We are here to help, and we offer flat-fee consultations on non-compete agreements.

I was fired and they say it was "for cause." Can I still get a severance?

No one likes to be fired, least of for a mistake or misunderstanding or a minor infraction.  But it happens all the time:  for whatever reason a boss doesn't want to work with an employee anymore and finds a reason to fire him or her. 

And that is all it means to be fired "for cause": it means your boss named a specific reason why you were being fired.  While being fired "for cause" may impact your ability to collect unemployment benefits, it does not necessarily impact your ability to negotiate a severance.

First of all, to put it simply, your boss may have lied.  Your boss may have said you were being fired for losing a small client, or for submitting the wrong paperwork, or for dinging the company truck.  But maybe your boss also wanted to fire you because he knew you were pregnant, or because he knew you would soon earn a bonus he did not want to pay, or because he knew you had complained about improprieties at the company. 

In such a case, your boss's stated reason for firing you is what lawyers call a "pretext."   In fact, you may have a claim against your employer for firing you in violation of law.  The bad news is that it is pretty common for people to be fired in violation of the law.  The good news is that illegal firings are one of the most common reasons why severances are paid.  In exchange for the employee giving up the right to sue their employer for the employer's illegal action, the employer pays the employee a severance. 

But even if your boss did not have some hidden and improper motive for firing you "for cause," that does not mean you cannot negotiate a severance, a payment of several weeks or months of salary on your way out.  Because if you have something of value that your company wants, they should have to pay you for it.  As we have discussed in previous posts, some common reasons our clients are able to negotiate severances are that they had:

  • ·         A claim to unpaid wages. 
  • ·         Good relationships with clients or customers. 
  • ·         Know-how, trade secrets and intellectual property
  • ·         Stock or shares or equity in the company. 
  • ·         Other legal claims against the company. 

Even if you have been fired for cause, if your company is asking you to sign any kind of separation agreement, or if you feel you have something of value that the company is asking you to walk away from, you may still have leverage to negotiate a severance.  Granovsky & Sundaresh is here to help.  Call or e-mail us any time.

I am on FMLA leave from my job, and I don't want to go back. Can I still get a severance?

It's common occurrence.  Maybe you just had a baby, and took some unpaid leave.  Maybe a family member got sick, and you needed some time off.  Maybe you got sick yourself, and had to miss work for a number of weeks.  In any case, right now you aren't going to work, but under the FMLA, or Family Medical Leave Act, your employer is holding your job open for you when you get back from leave. 

Except you don't want to go back.  Maybe you decided that you want to be a stay-at-home dad or a stay-at-home mom.  Maybe you found a new job that is more flexible, and will let you care for your sick relative long-term.  Maybe you have decided to go into business for yourself.  In any case, while you were on FMLA leave, you've made up your mind that you did not want your old job back.

Before you tell your old employer about your new plans, you should decide whether you want to negotiate a severance, and, if so, you should give careful thought to what you tell your employer, and when.

As we have discussed in previous posts, one simple question is ask yourself is this:  What are all the things your disliked about your old job?  Because some of the reasons why you don't want your old job back might be the basis for negotiating a severance:  

  • Did your old company ever fail to pay you, or take a cut of your commissions, or "forget" to pay you for overtime, or promise a bonus but not follow through? 
  • Did your old boss or co-workers ever say or do anything that made you uncomfortable for being who you are?  Was there someone at work who sometimes harassed you, or bullied you, or made remarks that just were not okay?
  • Did your old company make it hard to take family medical leave?
  • Did your old company refuse to accommodate you when you got sick?
  • Was your old company open to people of all backgrounds, races, religions, and sexualities?

If any of these situations rings true, you might have a legal claim against your old employer.  Your employer likely would be interested in avoiding even the possibility of a lawsuit, and so might be willing to negotiate a separation agreement with you, even though you are on FMLA leave.  In that separation or severance agreement, you would promise never to sue your company for anything that happened during your employment, and your company would pay you a severance.

Even if your old company was totally upstanding—respectful, accommodating, and fully professional—you may still be able to negotiate a severance while on FMLA leave.  For example, many companies ask departing employees to sign "separation agreements," in which the former employee promises not to compete for their old employer's clients or customers, or not to disclose their former employer's trade secrets or proprietary information.  If your former employer wants to control your future behavior, they should pay you for that, even though you are on FMLA leave.

Many employers shy away from firing anyone who has recently returned from FMLA leave.  Simply put, the employer does not want to appear to be punishing its employees for having exercised their rights to family medical leave.  What this means is that, if you are on FMLA leave and you know you do not want to return to your job, you have leverage that can be used to negotiate a severance.

If you are on medical leave from a job you don't want to return to, and if you want advice on how to negotiate your departure, Granovsky & Sundaresh is here to help.  Call or e-mail us any time.

My old company called me a freelancer. Can I get a severance?

Many of the laws that protect workers from discrimination and wage theft were written for the so-called "old economy," where a company that needed more help would just hire more employees.  But in the so-called "new economy" or "gig economy," many companies think they can achieve greater efficiency by limiting the number of employees they hire, and relying instead on supposedly more flexible sources of labor.  A company may call the people it hires freelancers, or consultants, or contractors, or vendors, or "temporary hires." 

If you have had a long working relationship that is now coming to an end, you may be able to negotiate a severance, even the company you worked for never called you an "employee."  

First of all, the company may have misclassified you.  It doesn't matter what the company called you; it doesn't matter whether the company issued you a Form 1099 instead of a Form W2 at the end of the year.  If you worked on a company's premises every day, if you all the equipment or software or data that you used to do your job was owned by the company, if you were under the day-to-day supervision of company employees, if you did not have final authority over your own schedule and practices, if you were not actively selling your services to a roster of companies, then you might have been an employee.

If your company misclassified you—if it called you as a freelancer or independent contractor even though you were, in reality, and employee—then you can negotiate a severance when you leave, just as any other employee could.  Does your company owe you unpaid wages or overtime?  Do you have any other claims against the company, including for failure to recognize your right to family medical leave, or to accommodation for a disability?  If so, all of these are leverage for negotiating a severance.

But even if your company did not misclassify you when it called you a freelancer or an independent contractor, you may still be able to negotiate a bonus payment at the end of your relationship.  Did the company ever fail to pay your invoices, or pay you less than you were owed on an invoice?  Do you have valuable confidential information, or customer contacts, that the company wants to protect with a new non-disclosure agreement or new non-compete agreement?  Were you issued any stock or shares in the company, in compensation for your work?  All of these could be leverage for negotiating a departing payment from a long-term business partner.

If you are a freelancer and are at the end of a long business relationship, Granovsky & Sundaresh is here to help.  Feel free to call or e-mail us any time.

I found a new job, and I want to quit my old one. Can I get a severance from my old job?

There are few satisfactions in life quite like finding a great new job.  But it is important not to let your pleasure cloud your judgment:  before you tell your old employer that you will be leaving, you should consider whether you want to ask for a severance.

One simple question is ask yourself is this:  What are all the things your disliked about your old job?  Because some of the reasons why you are leaving your old job might be the basis for negotiating a severance:  

  • Did your old company ever fail to pay you, or take a cut of your commissions, or "forget" to pay you for overtime, or promise a bonus but not follow through? 
  • Did your old boss or co-workers ever say or do anything that made you uncomfortable for being who you are?  Was there someone at work who sometimes harassed you, or bullied you, or made remarks that just were not okay?
  • Did your old company make it hard to take family medical leave?
  • Did your old company refuse to accommodate you when you got sick?
  • Was your old company open to people of all backgrounds, races, religions, and sexualities?
  • Did your old company make it hard for you to perform your National Guard duties?

If any of these situations rings true, you might have a legal claim against your old employer.  Your employer likely would be interested in avoiding even the possibility of a lawsuit, and so might be willing to negotiate a separation agreement with you.  In that agreement, you would promise never to sue your company for anything that happened during your employment, and your company would pay you a severance.

Even if your old company was totally upstanding—respectful, accommodating, and fully professional—you may still be able to negotiate a severance.  For example, many companies ask departing employees to sign "separation agreements," in which the former employee promises not to compete for their old employer's clients or customers, or not to disclose their former employer's trade secrets or proprietary information.  If your former employer wants to control your future behavior, they should pay you for that.

And remember:   Your leverage for negotiating a severance drops as soon as your old employer learns that you have found a new job.  So, before you tell your old boss about your new plans, decide whether you want to ask for a severance, and plan your strategy.

If you have found a new job, and want to negotiate the best possible terms for your departure from an old job, Granovsky & Sundaresh is here to help.  Call or e-mail us today.