Regardless of whether you arrive at this topic from the perspective of the outgoing employee or the former employer, it is important to know what the possible and likely options and remedies for each side are. To that end, the former employer (who, in all likelihood would be the plaintiff), has a number of choices, including the following:
- The employer can seek injunctive relief from the court (in legalese, this is known as a "Temporary Restraining Order" or "TRO" for short), barring this former employee from working for a competitor;
- The employer can, under certain circumstances, recover the money he paid the employee if the employee was disloyal on company time;
- The employer can, in limited circumstances, try to recoup the profits that were lost as a result of the former employee's disloyalty; and,
- Where the employment agreement contains such a provision, the employer can seek to recover liquidated damages from the former employee
WHAT A FORMER EMPLOYER (PROBABLY) CAN'T RECOVER
Generally speaking, there are two forms of damages that a former employer will almost certainly not be able to recover from a departing employee:
- Unjust Enrichment.
One of the most common claims that companies make against departing employees is that their new employer has unfairly piggy-backed on their work effort and investment, which is referred to as "unjust enrichment." In the non-compete realm, these claims usually fail because, as one appellate court noted, "[T]he mere fact that the plaintiff's activities bestowed a benefit on the defendant is insufficient to establish a cause of action for unjust enrichment," Clark v. Daby, 300 A.D.2d 732 (3d Dep't 2002). In other words, the causal chain between the new and fotrmer employer is, from the courts' perspective, too attenuated.
- Damages that are Unduly Speculative. At the risk of stating the obvious, unless the former employer can identify specific clients, accounts or damages that they suffered as a direct result of the former employee's (wrongful) actions, the case will go nowhere in a hurry. Courts will afford a short leash to a plaintiff's claims that "it is impossible to tell the full extent of the damages wrought by the defendant's actions." If you are the plaintiff, you have to be prepared to prove your damages with competent evidence.
For additional information on this topic, I strongly recommend that you download the book I authored on the subject, "To Compete or Not to Compete: The Definitive Insider's Guide to Non-Compete Agreements Under New York Law."
