Restrictive Covenant Practice

A key employee just resigned, took gigabytes of your confidential information on a thumb drive, and is now working for your competitor.  What do you do next?  What should you have done before?

The expectation of continued relationships with clients/customers and a business’s confidential information give it an advantage over competitors.  Our attorneys assist clients in protecting that advantage.  We not only litigate these cases, but also provide clients with strategic counseling regardless of whether the matter involves a former employee, existing employee or a prospective new-hire.

We counsel and represent businesses and executives in a variety of industries and regularly provides the following services:

  • Establishing a protocol of best practices and “rapid response” tactics  where an employee or former employee is suspected of violating a restrictive covenant or misusing confidential information;
  • Prosecuting, defending and resolving litigations involving restrictive covenants and common law obligations such as the taking and misuse of confidential information, an employee’s duty of loyalty, and unfair competition;
  • Providing assessments and strategic advice in real-time before a business hires a competitor’s employee bound by a restrictive covenant, or before discharging an existing employee whose contract contains such covenants; and
  • Drafting, negotiating and revising employment, confidentiality and asset purchase agreements, replacing “boilerplate” contract language with industry or employee-specific and customized clauses that will better protect your business if they are violated.

Recent Success Stories

  • Four days after an employee resigned and joined a competitor, we obtained a temporary restraining order limiting his ability to have certain interactions with clients.  Less than one month later, after a two-day preliminary injunction hearing, the court enforced our client’s contract and barred the former employee from soliciting, accepting business from, or servicing key clients for a 24-month period.  Preparedness here meant quick forensic analysis to show the Court that the former employee had taken massive amounts of confidential information on a memory stick. 
  • We successfully counseled a high-level executive subject to restrictive covenants who wished to change employers.  Although his former employer requested a temporary restraining order and preliminary injunction pending arbitration, the court refused to prevent our client from accepting business from clients that wanted to work with him.  This resulted in a favorable settlement in a time and cost-effective manner.
  • Our client was granted a unique temporary restraining order stopping a former employee, an insurance agent, from working for a direct competitor and advertising his new position on LinkedIn. The employee sent an email attempting to resign “effective immediately” despite a provision in his employment agreement that required him to give 60 days notice. The court agreed with our position and prohibited the employee from working for the competitor based on the employee’s failure to honor the 60-day notice provision. Unlike cases that involve enforcement covenants not to compete, here the contract’s notice provision was enforced to keep the employee from working for the competitor.  This allowed the client to arrange for a smooth transition of business to another employee and decreased the likelihood that clients would leave when the employee’s employment actually ended.
  • We successfully obtained partial summary judgment on behalf of our client, an insurance brokerage resulting in a favorable settlement just before trial.  In this case, our contract language was enforced in several critical ways, including allowing us to successfully oppose a claim that the covenants were not enforceable because of our client’s claimed breach; holding that the former employee breached our agreement by not giving proper notice at the time he resigned, and concluding that a 24-month restriction on an insurance producer’s ability to solicit and accept business from former clients was enforceable.
  • We obtained a temporary restraining order and preliminary injunction for a placement firm, effectively shutting down a group of employees who had established a competing business and were using confidential contact information that they had copied and taken with them.  This case also resulted in our client being awarded recovery of its attorneys’ fees.
Name Title Direct Dial Vcard
Drogin, Laurent S. Partner Partner 212.216.8016 VCard
Kleinmann, David N. Partner Partner 212.216.1115 VCard
Schoenstein, Richard C. Partner, Co-Head of Securities and Financial Services Litigation Group Partner, Co-Head of Securities and Financial Services Litigation Group 212.216.1120 VCard
  • David Kleinmann Authors Law360 Article on Clearing Up Broker-Dealer Classification Questions in NY
    July 6, 2017

    Law360 published an article authored by Labor and Employment partner and co-chair of the Restrictive Covenant practice David Kleinmann titled, “Clearing Up Broker-Dealer Classification Questions in NY.” The article explores a recent decision by the New York State Department of Labor’s Unemployment Insurance Appeal Board that provides broker-dealers with greater clarity surrounding whether Financial Industry Regulatory Authority-registered representatives working in stockbroker positions are properly classified as independent contractors and whether sales mentorship and assistance programs can be conducted without creating an unintended employer-employee relationship.

  • Defend Trade Secrets Act Signed Into Law
    May 24, 2016

    On May 11, President Obama signed the Defend Trade Secrets Act (DTSA) into law.