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Why Restraining Orders Are Crucial in a Non-Compete Case


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1/20/2015
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Image: Danilo Rizzuti courtesy of FreeDigitalPhotos.net
Frequently, the first step in a case alleging that a former officer or employee breached a fiduciary duty by violating a non-compete clause is the company's filing of a request with the court for a temporary restraining order, which in legal circles is known by the shorthand abbreviation, "TRO."

At this point, you're probably wondering 1) "What does that mean?" and, 2) "Why is this filing so signficant?"
 

Practical Considerations and Implications of a TRO

The Nature of the Relief Sought

The company is seeking to prevent its former employee from either working for a competitor, or exploiting some knowlege or client relationship that he or she gained while working for the company. And if the company is successful in securing this restraining order - even temporarily - that can put this former employee "on ice," or in other words, out of work, until a further order of the court.

Naturally, such an order can put a lot of pressure on the former employee, who may now be without a paycheck, which we can all agree that this is very signficant, and potentially devastating: a TRO can force this employee out of a job before it even begins, and deprive him of the ability to work in his chosen field until a further order of the court undoing that initial TRO is issued.

The Company's Burden of Proof

Given the high stakes involved, it should come as no surprise that the company which is seeking this extraordinary relief bears a high burden of proof on its request for such an order - i.e., that it has a legitimate business interest worth protecting, and that unless this emergent relief is granted, it stands to suffer immediate and irreparable harm.

As a practical note, if the Court grants TRO, it is signalling its view that the company is likely to ultimately prevail at the conclusion of the case.

Thus, the importance of that should be relatively apparent: before the employee expends significant sums defending this action, the Court is giving him insight into its thinking on the likely ultimate outcome of the case.

The Best Way to Defend Against the TRO

In most circumstances, particularly in New York, the company will be obliged to provide the employee with notice that it will be filing the application with the court for the temporary restraining order, in order to afford the employee a chance to oppose their application - even before it is signed.

This opportunity to be heard on the company's application should not be taken lightly - and here's why:

Since the company is seeking extraordinary relief, in that they are seeking a court order barring someone from going to work, the court will not sign off on such an order lightly. To the contrary, the court is obliged to closely scrutinize their application before granting their application.

Therefore, it is often a good idea to retain an attorney that is knowledgeable about this area of the law (i.e., non-compete agreements) to analyze your particular contract to ascertain whether there are any glaring holes in the agreement that might persuade the court to decline to sign off on the company's application in the first instance.
 

Why You Should Fight the TRO Before It's Signed

There are a number of powerful reasons why it makes sense to fight the TRO before it is signed rather than waiting until after it is signed to fight it on a full set of briefs that are filed with the Court.

Here's three (3) of the top reasons to fight the TRO from the very outset:

  • If the court simply declines to sign the application for the TRO, in many instances the company will be left without further recourse, such as the right to appeal;
  • If the court denies the TRO, the employee may be able to continue working - and collecting a paycheck - during the pendency of the case
  • By hiring an attorney that is knowledgeable and experienced in dealing with litigation revolving around non-competes, she may be able to convince the court to conduct an expedited hearing, or shorten the time of the TRO, thereby helping the employee return to work sooner rather than later.

 



Category: Non-Compete & Employment Agreements

Jonathan Cooper
Employment Litigation and School Negligence Lawyer

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