Proving Damages for Breach of Covenants Not to Compete or Solicit, Confidentiality, and Fiduciary Duty

Pursuing Lost Profits, Clawback Compensation, Inducement Payments, Loss of Good Will and Other Damages

Recording of a 90-minute CLE webinar with Q&A


Conducted on Wednesday, October 4, 2017

Recorded event now available

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Program Materials

This CLE webinar will provide guidance to employment litigators for proving damages after a current or former employee breaches a covenant not to compete with the employer, solicits the employer’s employees or customers, or discloses the employer’s trade secrets or other confidential information. The panel will also discuss circumstances in which the fiduciary duty of loyalty is implicated by the breach of a restrictive covenant, and potential damages stemming therefrom.

Description

Noncompete, non-solicitation and non-disclosure provisions are common restrictive covenants in employment agreements. When a current or former employee breaches any of these covenants, the employer may pursue monetary damages against the employee and, in some instances, the employee’s new employer. Proving damages is challenging because it is difficult to quantify the damaging result of the breach of covenant on the business.

Lost profits are often the largest source of damages for breach of restrictive covenants, but also one of the most difficult types of damages to prove and are particularly susceptible to attack. Oftentimes experts must be hired to help employers determine the appropriate formula for calculating lost profits damages. Other types of damages an employer may pursue include clawback compensation, restitution, goodwill impairment damages and liquidated damages.

The Defend Trade Secrets Act of 2016 introduced a new avenue for damages for trade secret theft, permitting an employer to recover damages for actual losses caused by the theft of trade secrets as well as unjust enrichment damages. Alternatively, the employer may recover a reasonable royalty. A court may double damages and award attorneys fees in the event of willful and malicious appropriation of trade secrets.

In some instances, employers can also pursue damages from a former worker’s new employer for breach of restrictive covenants, particularly when the new employer “raided” the employer’s company for qualified workers. Evaluating whether and how to pursue damages against a new employer requires careful consideration of the potential likelihood of success and the pitfalls of doing so.

Companies face additional challenges when attempting to enforce restrictive covenants when some or all of the actionable conduct takes place outside the U.S. Our panel will provide strategies for dealing with such cross-border disputes and provide an update on recent cases from outside the United States which have directly impacted U.S. multinationals attempting to enforce their restrictive covenants.

Finally, our panel will provide drafting strategies to ensure that companies have the strongest possible platform for enforcing their contractual and fiduciary rights.

Listen as our authoritative panel discusses strategies and best practices for employers to pursue damages against a current or former employee and/or his new employer following the breach of a covenant not to compete, solicit or disclose confidential information.

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Outline

  1. Potential causes of action following the breach of a restrictive covenant
    1. Breach of covenant
    2. Breach of fiduciary duty of loyalty
  2. Pursuing damages from employee
    1. Lost profits damages
    2. Clawback compensation
    3. Restitution
    4. Goodwill impairment damages
    5. Liquidated damages
  3. Damages available under Defend Trade Secrets Act of 2016
  4. Pursuing damages from employee’s new employer
    1. Evaluating when to pursue damages from new employer
    2. Tortious interference with contract
    3. Aiding and abetting breach of fiduciary duty
  5. Damages and remedies in cross border disputes
  6. Tips on drafting enforceable restrictive covenants

Benefits

The panel will review these and other key issues:

  • What types of damages may employers pursue when a current or former employee breaches a restrictive covenant?
  • How does the Defend Trade Secrets Act of 2016 address damages for disclosing trade secrets?
  • What methodologies can be used to establish lost profits damages?
  • When can and should an employer go after a former employee’s new employer for damages for breach of a restrictive covenant?
  • What remedies and damages are available when the wrongdoing occurs outside the United States?
  • How can employers draft enforceable covenants to maximize potential damages and equitable remedies?

Faculty

Boling, Andrew
Andrew (Andy) Boling

Partner
Baker & McKenzie

Mr. Boling represents employers and management in various cross-border employment and labor matters. He has represented...  |  Read More

Harbison, Emily
Emily P. Harbison

Partner
Baker & McKenzie

Ms. Harbison has significant experience defending employers in matters involving employment discrimination, including...  |  Read More

Schoenstein, Richard
Richard C. Schoenstein

Partner
Tarter Krinsky & Drogin

Mr. Schoenstein has 25 years of experience handling business and employment disputes, through trials and appeals,...  |  Read More

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