Potential Tort Liability for Attempting to Enforce An Unenforceable Restrictive Covenant

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The situation is this ? you want to enforce a restrictive covenant against a former employee who you believe is unlawfully competing and/or soliciting clients. Time is of the essence, and you want your legal counsel to send a cease-and-desist letter to the new employer. In reviewing the restrictive covenant and learning about the underlying facts, the lawyer determines that an argument could be made either way that the covenant does or does not prohibit the former employee's work for his new employer. Or, perhaps the former employee has gone to work for a competitor, and you suspect that the employee is breaching his or her obligations under a restrictive covenant but lack proof that there has been a breach; however, the failure to take action if a breach is ongoing would cause significant harm. In either event, a court could rule against you for one of the many reasons that courts refuse to enforce restrictive covenant agreements. Perhaps the covenant might be deemed to broad in geographic scope, or perhaps it extends for too long a period of time, or perhaps the covenant is written more broadly than is necessary to protect the legitimate interests of the employer, or maybe it is unclear whether the new employer fits within the restrictive covenant's definition of a "competitor."

Employers frequently respond to this situation by having their counsel send a letter to the former employee and his or her new employer, demanding that the new employer terminate its relationship with the former employee, with the expectation that a court ultimately would resolve any dispute over the enforceability of the restrictive covenant. This tactic, however, can potentially create liability for the employer.

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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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