Protecting Your Company's Secrets: Drafting and Enforcing Covenants Not To Compete


“Covenants Not To Compete” are essential tools used in the insurance industry, and in many industries, to prevent essential employees from leaving your company to work for a competitor and to take with them trade secrets or confidential and proprietary job knowledge. Both in North Carolina and throughout the Southeast, courts will enforce reasonable covenants not to compete.
In appropriate cases, courts will enjoin former employees from working elsewhere until the court decides whether the former employee’s plans breach the covenant not to compete. To enjoin a former employee from working for a competitor, in the first instance, an employer must show that: (1) it is likely to succeed on the merits; (2) it is likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in its favor; and (4) an injunction is in the public interest. Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7 (2008).
If you seek to enjoin a former employee, to prevent the former employee from working with a competitor and from violating a covenant not to compete, you must act quickly to preserve your rights. Even putting off enforcement of a covenant not to compete for six months indicates a lack of urgency and jeopardizes your ability to obtain a preliminary injunction. General Parts Distrib. LLC v. Perry, 2012 U.S. Dist. LEXIS 147248 (E.D.N.C. 2012). It is imperative that you act immediately when seeking to enforce a covenant not to compete.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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