Non-compete clauses are common in many business contracts, particularly for employees and contractors. These agreements prevent individuals from working with competitors or starting a competing business for a specified period after leaving an organization. However, what happens when a non-compete clause is violated?
Understand the terms of the non-compete clause
First, review the non-compete clause carefully. Pay attention to the length of time, the geographic area, and the type of work that is restricted. These clauses must be reasonable in scope. If they are overly broad or vague, they may not be enforceable. Knowing these details will help you determine if a violation truly occurred.
Evaluate the situation
Once you understand the clause, you need to assess whether the violation is significant enough to take action. Did the person violate the terms by working with a competitor or starting a competing business? Evaluate the damage caused by this action. Are there any financial losses or reputational damage to your business?
Attempt resolution through negotiation
In many cases, you can resolve the violation through negotiation. Talk to the person who violated the non-compete clause and try to reach an agreement without taking legal action. This could involve them ceasing the competing activities or paying damages. Many disputes can be resolved amicably without the need for court intervention.
Pursue legal action if necessary
If negotiation fails, and the violation is severe, legal action may be necessary. You can seek an injunction to prevent the individual from continuing their actions or pursue damages for the breach of contract. Courts will typically look at the reasonableness of the non-compete clause when making a decision.
Proactive steps to prevent violations
To avoid non-compete clause violations, it’s important to have a well-drafted agreement in place from the beginning. Make sure employees understand the terms, and keep track of agreements when employees leave. Regularly review and update non-compete clauses to ensure they remain enforceable.
Handling a non-compete clause violation requires careful consideration of many different things. By being proactive, you can better protect your business and avoid costly disputes.