A court might deny an employer, who would be seeking to enforce a restrictive agreement, the injunctive relief they seek to obtain. However, if the court grants the requested injunctive relief against the harm to the employer, it must weigh the potential hardship to the employee. At times, assuming that the employer seeks to enforce the restrictive covenants, the employee might have acknowledged and agreed not to contend hardship with respect to the restrictive covenant at issue. Suppose this is the case, and owing to the fact that the employee would need to continue earning a livelihood, the employee remains free to participate in particular business activities.
As a continuation of our discussion, we have hammered on the “Risk of Irreparable Harm” as another factor that determines the success or failure of obtaining injunctive relief in our blog post titled “The Risk of Irreparable Harm if Injunctive Relief is not Granted” and Part XVII of the series.
Risk of Irreparable Harm if Injunctive Relief is not Granted
A court may grant or fail to grant injunctive relief based on the prong of irreparable harm to the plaintiff’s business. In this case, the employer is required to show the court that it would be in danger of severe and irreparable harm to the interests of its business, for which monetary damages would not remedy if the employee’s conduct remains unchecked. This underscores the need for employers to make sure that every employee acknowledges, during the signing of a restrictive covenant agreement, that they understand that the employer would suffer irreparable harm in the case of a threat of breach or a breach itself.
Regarding this matter, employers may draw helpful guidance from case law in the jurisdictions where they seek injunctive relief. For instance, employers within New York may satisfy the irreparable harm standard by showing the court that the loss of client goodwill or relationships or the misuse of confidential information would result from the violation of restrictive covenants. During past hearings, courts have ruled that irreparable harm that warrants the granting of preliminary injunctive relief would be constituted by the loss of the goodwill of a viable, ongoing business. In another case, a court found that where the loss of goodwill is not readily quantifiable, a breach of restrictive covenants constitutes irreparable harm.
Essentially, an employer may demonstrate the prong of severe and irreparable harm by showing that it would not only suffer a dilution of the goodwill it has developed with its customers but would also lose business should the defendant(s) be allowed to engage in unfair competition by using the employer’s proprietary and confidential information. In such a case, a court would be compelled to grant an injunctive relief because irreparable harm would directly result from the loss of customer goodwill and client relationships.
In the next blog post titled “The Likelihood of Success on the Merits in Seeking Injunctive Relief” and Part XVIII of this series, we will review the concept of the “Likelihood of Success on the Merits,” which is another factor that determines the success of seeking and obtaining injunctive relief.
In the meantime, stay tuned for more legal guidance, training, and education. In the interim, if there are any questions or comments, please let us know at the Contact Us page!
Always rising above the bar,
Isaac T.,
Legal Writer & Author.