What Happens if You Breach a Covenant Not to Compete?

Breaching a Covenant Not to Compete in New Jersey

If you sue or you’re being sued for violating a covenant not to compete or violating a non-competition agreement, what is your legal exposure?  Money damages, an injunction to shut down your current employment, your new business or enterprise, punitive damages, jail?

Generally, the economic damages available for the breach of a restrictive covenant and/or non-competition agreement include(s) money damages (also known as “compensatory damages”), accounting for profits, and liquidated damages.  Punitive damages are not a realistic exposure in almost all but the most extreme cases, and jail time is out of the question. But remember, there is more exposure than just economic damages; there is also injunctive relief that may be requested.

The party seeking injunctive relief must prove that (1) irreparable injury to its business will occur in the immediate future if it is not shut down or restored. Irreparable harm means that the damages to the innocent party cannot be fully compensated by an award of money; (2) the threatened injury to the party seeking legal protection outweighs the harm to the offending party if the relief is granted; (3) issuance of the injunction is not injurious to the public interest, and (4) the party seeking injunctive relief has a substantial likelihood of success on the merits of its relief. Examples of when a request for an injunction would be appropriate are (1) the continued ability to stay in business is at risk absent the protection of the court; (2) bankruptcy will result if relief is not granted, or (3) absent a court order, protected, confidential information or trademarks will be disclosed to the competition or public. Many other examples may very well qualify for injunctive relief.

New Jersey courts may take into consideration the former employee’s gain from the breach when calculating a successful damage claim.

Employees have been held liable for profits earned from the competition with a “soon-to-be former employer” if those damages were gained while still employed.

Fredrick P. Niemann Esq.

Are you an employee, business owner or employer with a question(s) about covenants not to compete in NJ who believes he or she has suffered or expects to suffer an economic or other catastrophic loss because of a violation of a covenant not to compete in NJ or illegal restriction?

If so, contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or fniemann@hnlawfirm.com to schedule a consultation about your particular matter.

Our attorneys welcome your calls and inquiries and you’ll find us easy to talk to and very approachable.  Hanlon Niemann & Wright appears statewide in all 21 counties in New Jersey each week.


Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a New Jersey Covenant Not to Compete Attorney

Fredrick P. Niemann, Esq. is a NJ Covenant Not to Compete Law Attorney serving these New Jersey Counties:

Monmouth County, Ocean County, Essex County, Cape May County, Mercer County, Middlesex County, Bergen County, Morris County, Burlington County, Union County, Somerset County, Hudson County, Passaic County