In a previous post, I talked about the reasons that a company might ask the court to issue non-compete injunctions against an employee. But what is the actual process at a hearing once the employer has asked the court for such an injunction?
A hearing on non-compete injunctions is perhaps the most important part of a non-compete lawsuit, at least until trial. At the hearing, the company’s lawyer who is seeking the injunction must prove certain elements in order to have the injunction issued. The most important aspect that the company must show is called “irreparable harm.” In essence, the company must prove that the employee’s actions, such as working for a competitor somewhere in the geographic area covered by the non-compete, will cause extreme damage to the company that is so extensive and harrowing that the company could never be compensated with mere money. That’s irreparable harm.
For example, if an employee has stolen trade secrets (like the formula to Coca-Cola) and gone to work for Pepsi, then the disclosure of that valuable trade secret could cause irreparable harm to Coca-Cola that could not ever be repaired by Pepsi paying some money to Coca-Cola later in the lawsuit. Or if an employee goes to work for a competitor and tells all of the company’s clients terrible, untrue things about the company that is damaging the company’s reputation, then perhaps that might rise to the level of irreparable harm.
The company must also prove that the company will be victorious ultimately at trial. This is called “proving the likelihood of success on the merits of the case.” Because the court would be issuing a drastic remedy that might damage the employee if the injunction is wrongfully issued, the courts require a company to provide enough evidence that the company is likely to prevail at trial. That’s a pretty high burden, especially since the lawsuit was just filed. No depositions have been taken and no documents have been exchanged, so the parties and the court are operating on limited information.
One way that the company can try to prove irreparable harm and likelihood of success on the merits of the case is through affidavits. Affidavits are sworn written statements, and in these types of non-compete cases, typically are provided by HR managers or upper-level management. The affidavits contain a description of the employee/defendant’s job duties while employed, the territory and customers that the employee covered, and the types of confidential information that the employee either had access to or had allegedly taken with him/her when the employee left. The affidavit is the primary means to convey information directly to the judge reviewing the case, since generally the judge will not hear live testimony at the hearing. Often these affidavits are accompanied by supporting documents, such as emails, text messages, or other computer information.
The employee also has an opportunity to provide an affidavit to rebut or counter the allegations in the lawsuit or the company’s affidavits. Often the company will state that the employee covered a much great territory for the company than the employee actually did. Or the company will argue that the employee took certain information or documents that the employee really didn’t. So the employee is given an opportunity to provide sworn testimony in an affidavit to explain the other side of the story. A well-crafted affidavit, supported by credible evidence, can be crucial in defeating a preliminary injunction.
Finally, at the hearing itself, with all the affidavits and evidence before the court, the company’s lawyer must get up and try to convince the court that an injunction must issued immediately to prevent the employee from destroying the entirety of the company’s business.
The employee’s lawyer will also be given an opportunity to argue against the injunction. These types of hearings can last well over an hour or more, as the judges (especially in Greenville) are more willing to wade into the details of a case, particularly if the judge is leaning towards issuing the non-compete injunction against the employee. At this point, the employee’s attorney will point out the various flaws in the non-compete agreement itself. If, for example, the non-compete agreement covers the entire United States, while the employee only worked in one county in South Carolina, then that agreement is wildly overly broad and unenforceable.
A good tactic for an employee to take is to point out these very flaws, such as geographic overbreadth (i.e., covers too large a territory), temporal overbreadth (covers too long a time period, such as three or more years), or is otherwise not narrowly tailored to protect a legitimate business interest of the company. If a judge agrees that the agreement is unenforceable on its face, the judge will not grant any non-compete injunctions.
Ultimately, the judge will decide whether or not to grant any non-compete injunctions. If the court grants the injunction, then the employee will be limited in terms of employment (or forced out of work altogether) while the lawsuit proceeds. The company at that point has a great deal of leverage during the litigation. The employee can appeal to the court of appeals, but the injunction still remains in place.
If the court refuses to the grant the injunction and the employee wins, then the lawsuit will proceed normally. Many companies seek to win a quick victory through an injunction and are less willing to spend another $50,000 plus in order to pursue litigation to completion, so if the company loses the injunction, the company can also lose interest in the lawsuit itself, meaning the case can settle more quickly.
The key takeaway here is that a hearing on non-compete injunctions is a critical juncture of your case. If you’ve been sued under a non-compete and the company is seeking an injunction, you need to seek out experienced South Carolina non-compete attorneys immediately so you can begin preparing for the hearing.