When an employer believes that a former employee has violated post-employment restrictive covenants, it often seeks injunctive relief intended to prevent harm to its business pending a final determination on the merits of the claim. Last week, the North Carolina Court of Appeals declined an employee’s request to lift a preliminary injunction involving non-solicitation and confidential information covenants before the trial on the matter.
In SIA Group, Inc. v. Patterson, the plaintiff sued a departed executive who it claimed took customer lists and confidential business information in violation of post-employment restrictions contained in his employment contract. The trial court imposed a preliminary injunction prohibiting the defendant from contacting customers of his former employer or using its confidential information. The defendant filed an appeal to the North Carolina Court of Appeals seeking an interlocutory order overturning the injunction.
The Court of Appeals refused, leaving the injunction in place pending trial. Without ruling on the merits of the covenants, the court concluded that it could only disturb the injunction at this stage of the proceedings under limited circumstances. The defendant claimed that the injunction functionally prevented him from making a living. The appellate court disagreed, noting that the employee had made numerous sales for his new employer to clients not associated with his prior employer. As such, he was able to work pending the case’s outcome.
This matter did not involve a traditional non-compete, which would have prevented the employee from working for a competitor even if he did not solicit any of his former employer’s clients. In that circumstance, an appellate court may be more inclined to review the injunction given the broader prohibitions that the non-compete imposes. In this situation, the more limited non-solicitation restrictions resulted in an easier argument for injunctive relief by the former employer.