When an organization believes a departing employee is about to violate a noncompete agreement, what can it do? The first step in the enforcement of noncompete or nondisclosure agreements is often a trip to the courthouse in pursuit of an injunction. An injunction is a court order prohibiting a party from taking some kind of action. In this example, the injunction may prohibit the departing employee from taking the disputed job offer or from discussing certain information subject to the NDA.
Walmart recently sought an injunction against its former senior vice president and chief tax officer, who announced in May that she had accepted a job with Amazon.
According to Walmart, the former employee’s new position violated the terms of a noncompete clause in her employment contract with Walmart. A spokesperson said that all senior Walmart executives sign agreements barring them, for two years after resignation, from taking jobs with competitors that make more than $7 billion in annual revenue.
To obtain an injunction in a noncompete or nondisclosure case, the petitioner (in this case, Walmart) must show that such an agreement was in force, that it was or is about to be breached, and that the breach could cause substantial harm.
Here, Walmart said that the former senior vice president and chief tax officer has substantial knowledge of Walmart’s strategic plans, such as companies it may be targeting for acquisition. Amazon could easily use such knowledge to interfere with Walmart’s takeover deals or drive up their cost.
Does the former Walmart executive have a valid defense to the injunction request?
The former executive may have several grounds on which to dispute Walmart’s request for an injunction, such as the validity of the agreement, whether a job at Amazon would breach the noncompete clause, and whether the potential harm to Walmart is real.
One thing to be aware of is that many courts won’t enforce noncompete agreements if they are found to be too limiting in time or scope. The court will also examine the validity and applicability of the noncompete clause.
For example, the court could find that the agreement unduly limits the former executive’s job mobility, or that Amazon is not the type of competitor envisioned by the drafters of the noncompete clause. It could rule that this particular executive was not privy to the private information that, if exposed, could harm Walmart’s business.
Noncompete and nondisclosure agreements must be carefully drafted to ensure their enforceability should the need arise. An experienced attorney can draft or review yours so that it meets your specific goals.
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