What Is a Breach of Non-Compete Agreement?
A non-compete agreement, when done correctly, is a legally binding agreement between an employer and an employee which specifies that the employee will not work for a competing employer for a period of time. Likewise, that employee is not allowed to sell or otherwise reveal important company secrets after their employment ends.
While these agreements could be very manipulative in some situations, there are also many situations in which they are necessary for a company in order to protect its interests. When a non-compete agreement is breached, a business attorney can assist you in recovering your losses or protecting your interests.
There are two types of damages available in a breach of non-compete agreement lawsuit: injunctive relief and monetary damages. It is also possible that the losing party could be forced to pay the other’s attorney fees, though this is a more situational event.
But in order to be awarded damages in a breach of non-compete agreement case, the agreement must be legally enforceable in Illinois. Recent changes have been made to how our state handles these agreements, so let’s briefly go over these since they could potentially render an agreement useless.
What Are the New Rules for Non-Compete Agreements?
There were some pretty major changes made to how Illinois handles non-compete agreements. In short, employers have had a number of limitations placed on them. Non-compete agreements weren’t the only thing affected; non-solicit agreements and non-disclosure agreements have also had limitations placed upon them.
If you entered into a non-compete agreement with an employee prior to January 1, 2022, then the agreement should not be affected by these changes. However, an agreement that would have been acceptable the day before might no longer be okay.
The important changes include the following:
- Employees cannot enter into a non-compete agreement if they are paid less than $75,000 a year. This threshold increases by $5,000 every five years to account for inflation.
- Certain industries, like construction, are not allowed to use non-compete agreements at all or only rarely.
- Employees have to be advised to consult counsel.
- Employees have to be given fourteen days to sign.
- The agreement must have a valid consideration behind it; if there is nothing for an employer to protect, there is no reason for an agreement.
Of these, the last is the most important. An employer is not allowed to simply have employees sign a non-compete agreement just because they feel like it. In fact, a non-compete agreement is considered to be void unless it meets the following conditions:
- The agreement does not impose an undue hardship on the employee.
- The agreement does not injure the public.
- The employee is given the proper time and consideration before signing.
- The agreement is related to a valid employment relationship.
- The agreement only lasts as long as is necessary to protect a legitimate business interest the employer has.
If your non-compete agreement complies with these conditions, it should be valid and binding. This means that you have the right to seek damages through a breach of non-compete agreement lawsuit.
You could seek monetary damages or injunctive relief through a lawsuit of this nature. Let’s turn our attention over to these next.
What Is Injunctive Relief?
If your primary goal is to protect the company’s interests, the easiest damage to get granted is injunctive relief. When a non-compete agreement is shown to be valid, injunctive relief can be sought to prevent the employee from continuing to break the agreement. In this case, that would mean they stop working for your competition.
Injunctive relief can be sought through a preliminary injunction. A preliminary injunction requires you to show that you are likely to win a lawsuit. This is done by showing that you have a valid agreement, that the other party is violating the agreement, and that there is a valid company interest to protect. If you can present the evidence to show this, then you can have the court uphold the non-compete agreement throughout the length of the lawsuit.
Keep in mind, however, that you aren’t guaranteed to win just because you had a preliminary injunction granted. While you are likely to win, lawsuits always leave room for curveballs and surprises. Even if you are granted a preliminary injunction, you should treat the lawsuit seriously until the very end.
What Kind of Monetary Damages Can Be Recovered?
While it is fairly easy to win injunctive relief, it is typically much more difficult to recover monetary damages through a breach of non-compete agreement lawsuit. This is due to the fact that it requires you to prove a lot more to win monetary damages than it does to win injunctive relief. With injunctive relief, you need to prove that there is a valid contract and that it is being violated. To win monetary damages, you need to prove that you lost profits due to the breach in question.
However, if you did lose profits, then the monetary damages you can recover will vary depending on the amount you are able to prove. Of course, this is assuming that you seek compensatory damages. This is the most common form of monetary damage sought, but it isn’t the only one. You could try to seek punitive damages. However, you need to show that there was malicious conduct.
Of course, you may have had liquidated damages included in the contract. These are damages written into a contract to punish any breach of said contract. These can get complicated, but that’s the nature of cases like these.
Don’t forget, too, that the losing party may be responsible for paying the other side’s attorney fees and court costs. However, this requires the winning party to ask for this punitive punishment, and your conduct needs to have earned it. If you comport yourself appropriately, then these shouldn’t be an issue.
When Should I Contact an Attorney?
If you suspect that there has been a breach of contract, it is a good time to contact an attorney. They can help you to take quick action to hopefully resolve the issue before you face repercussions.