When confronted with the breach – or, the alleged breach – of a non-compete or non-solicit agreement, one of the first questions that begs to be asked is:
“What are the potential claims and liabilities arising from this?”
Simply put, in order to assess accurately what actions you should take – regardless of which side to the case that you’re on – it is imperative that you know going in what the potential claims, defenses and damages are.
That said, let’s analyze – briefly – what those potential claims are under New York law.
Generally speaking, there are 9 broad categories, or types, of claims that may arise from the claimed violation of a non-compete:
- Breach of contract – this is self-explanatory, and typically involves the specifics of the employment agreement, including the non-compete and non-solicitation provisions of the contract;
- Breach of Duty of Loyalty – Even at-will employees that have no employment contract are ethically and legally bound not to do anything to actively harm their employer’s interests
- Aiding and Abetting Breach of Duty of Loyalty – this too is largely self-explanatory. The point to bear in mind here is that under the right conditions, New York imposes liability on those third parties who affirmatively assist employees in breaching their fiduciary duties to their employers.
- Tortious Interference with Contract – This cause of action relates to, most commonly, the former employer’s existing contracts with customers that were breached
- Tortious Interference with Prospective Advantage – This relates to prospective customers, or clients, with whom the former employer did not have an actual contract with, but had a reasonable, and “tangible expectancy” that they would retain the former employer.
- Defamation – this category typically arises from the claim that the former employees bad-mouthed the former employer, causing harm to the former employer’s business
- Unjust Enrichment – This claim typically focuses on areas where there is no contract, or the contract is unenforceable for one reason or another, and the defendants apparently benefitted from something that rightfully belonged to the plaintiff, such as the plaintiff’s proprietary materials.
- Conversion – Similarly, albeit slightly different, conversion is where a defendant exerts control over the plaintiff’s property and “interfered with the plaintiff’s right of possession” of that property. In this context, that could include the plaintiff’s proprietary information or client list.
- Unfair Competition – Finally, this is the catch-all category which includes any form of “commercial immorality,” where the defendants piggy-back, and unfairly take advantage of someone else’s work product without paying for it, and then use that information to compete with the plaintiff.