I received a cease and desist letter regarding an employee’s non-compete agreement. Should I be concerned?

Yes! It is surprising how many of my business clients are under the false impression that non-compete agreements are unenforceable in North Carolina. In examining the enforceability of non-compete agreements, North Carolina courts evaluate the time and territory covered by the agreement. Courts also examine whether the agreement covers legitimate business interests or is merely meant to penalize employees. If the agreement is deemed reasonable, it will likely be enforced.

So, who should be concerned, the employee or the new employer? Both. The employee who agreed not to compete with its former employer can be held accountable for breach his/her contract. The former employer might seek an injunction preventing the employee from competing against it or, alternatively, it might seek monetary damages. The new employer might also face liability. For example, if the new employer is made aware of the agreement, but refuses to honor it, the new employer might face a number of business tort claims, including an unfair and deceptive trade practices claim. An unfair and deceptive trade practices claim allows a plaintiff to pursue treble damages (multiply actual damages by 3), attorney’s fees, and even punitive damages.

Non-compete agreements are often accompanied by non-solicitation and non-disclosure agreements. Thus, the employee and new employer could also face claims of misappropriation of trade secrets and similar claims. When you receive a cease and desist letter, it is critical to consult with an attorney who has practical experience in this area of law. Miller & Monroe has defended unfair and deceptive trade practices, misappropriation of trade secrets, and other business tort claims involving non-compete agreements. If your North Carolina business faces business tort claims, call Miller & Monroe today!

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