Here’s What Happens When You Breach Your Employment or Severance Agreement

Employers are increasingly watching former employees who have signed binding agreements to protect the employer’s data, business information, reputation and customers. If you’ve signed a non-disclosure, non-compete, non-solicitation or severance agreement, then you have an obligation to follow the instructions in those agreements.

Breaches of these agreements are frequent. Employees may purposefully or accidentally breach these agreements. Unfortunately, social media, online activity and digital evidence have made it easy for employers to identify breaches. This often results in the employer sending the employee or former employee a notice of breach or demand letter.

As with any threat of legal action, an employee is in immediate need of legal counsel to understand the financial liability for the breach and the appropriate legal response.

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How to Respond to a Notice of Breach

It’s not advisable to respond to an alleged breach by yourself. Any information or admissions you provide to your former employer will give them more evidence to pursue claims against you.

Employers rarely send a demand letter without intending to follow through on their threats to pursue litigation, an injunction or, in some cases, arbitration, if your agreement included that provision. The actual financial penalty you could incur may be specified in the agreement or by law. You may also be forced to pay the employer’s legal fees as part of a judgment or arbitration award.

Our attorneys can help you understand the amount of liability you face for the alleged employment agreement breach, as well as how to develop a response that could lead to a resolution.

You also need to include the expense of job loss and finding new employment if your former employer threatens your new employer with litigation for benefiting from any business information, trade secrets or customers you delivered. It’s quite common for employers in highly competitive industries to protect their competitive edge by using any means, including legal action, to prevent skilled employees from working for competitors.

You may be able to navigate an employer’s allegation of your contractual breach with the right legal guidance, while minimizing your potential financial losses.

Your Right to Earn a Living

Employers sometimes overstep the limits of an employment agreement and aggressively pursue former employees. The law provides you an opportunity to work, and many jurisdictions have laws and legal precedent in place to temper these overreaches by employers.

How do you know if you’ve really breached your agreement? Does your former employer have a right to take legal action against you?

You will need experienced legal counsel to explain whether or not your employer can legally enforce its agreement in your jurisdiction. It’s not advisable for an individual to respond to any type of demand letter when litigation is imminent without first consulting an attorney.

The lawyers at Potomac Legal Group have represented many employees in the Washington, DC, Maryland and Virginia regions in disputes with employers.

Alleged breaches of employment agreements are complex matters. In addition to potential liability, your former employer may also take steps to inform your new employer about the breach. They could even seek an injunction. This puts your new employment in immediate jeopardy.

Commonly Breached Employment Agreements

Employment agreements are commonly breached intentionally or inadvertently. You should maintain a file of every employment agreement you’ve signed and conduct a routine review of your obligations. Many employment contracts include numerous obligations, and some employers have separate agreements for non-disclosure, data protection, inventions and more.

Should your employer present you a new or revised agreement during your employment, you have the right to have it reviewed by an attorney.

Non-Disclosure Agreements & Confidential Business Information

Non-disclosure agreements (NDA) are common and cast a wide net over all of the employer’s business information and your interactions at work. All business information, including specific confidential business information and competitive information, would likely be covered by this agreement. Your interactions with customers, clients, co-workers and management might also be protected by an NDA.

An NDA may also include provisions that limit your discussions about the employer or your work product online and in social media.

The agreement may not be enforceable in some situations, or it may not cover every situation. An attorney would need to review your NDA to determine if it applies to an alleged breach.

Non-Compete Agreement: Competitor, Industry & Geographic Limitations

A non-compete agreement protects your employer by preventing you from working for a competitor in certain situations. You may have agreed not to work for a competitor in a specific role, industry, geographic location or time period.

In many jurisdictions, however, your employer may not be able to enforce every provision. You have the right to earn an income, and state and local laws may prevent or limit your liability in disputes over non-compete agreements.

Non-Solicitation: Customers & Employees

Your former employer does not want to lose valuable customers or skilled employees to your new employer. You likely have signed a non-solicitation agreement, or it may be a provision of another employment agreement.

Disputes involving customer poaching, client data theft and potential loss of customers are the most frequent area of breach allegations. If these allegations are not addressed immediately, then your former employer is very likely to pursue expensive legal action in order to protect itself from further customer and revenue loss.

Non-solicitation breaches may also place your current employer at risk of liability if they have benefited financially from your actions. If you’ve signed any agreement to indemnify your new employer, then you may be liable for any legal fees your new employer incurs in defending any lawsuit.

Resolving the matter should be your highest priority after receiving a notice of a breach.

Data, Intellectual Property, Inventions & Work Product

Employers want to protect their data and intellectual property and prevent it from falling into the hands of competitors. Additionally, employers don’t want employees removing data or destroying any digital evidence from employer-supplied computers and devices.

In many situations, employers accuse former employees of data theft or destruction and use the actions against them in severance negotiations, discrimination disputes and in appealing unemployment benefit claims.

Intellectual property, inventions and copyright assignments are common in the software, tech, startup, information and publishing industries. When, where and how you develop intellectual property are key to defending claims against alleged breaches of any employer agreement. Today’s work trends complicate matters. Many employees work from home with flexible work hours and use personal computer equipment for work.

Our lawyers can assist you in determining the ownership of any intellectual property you developed outside your employment, and we can defend any alleged breach.

Social Media, Non-Disparagement & Reputation

Employers are watching employees online after a separation. If you’ve signed a severance agreement, it most likely contained a provision making you liable for any disparaging comments you post online about the employer.

Many employees, understandably, have negative feelings about their employment and want to tell others. Social media and employer review sites make it easy to spread the word. However, if you’ve agreed to a non-disparagement provision at any time, then you will be breaching your agreement and have financial liability with respect to the breach should you post complaints of any nature online.

Social media is dangerous, and one click may breach your employment agreement and create substantial liability for you.

In the event of disparagement, an employer may have the right to demand damages or a refund of any severance money paid to you. You should count on former employers watching your online activities. They take disparagement seriously, and an employer may pursue claims against former employees to send the message that they take the business’s reputation seriously.

You should immediately seek counsel if an employer accuses you of breaching the non-disparagement provision of your agreement.

Exit Agreements & Data Protection

Many employers present a severance agreement, exit agreement or data acknowledgement to employees at the time of separation. These documents may seem benign, but they are carefully drafted to create liability for you if you’ve downloaded, destroyed or transferred any data. In many cases, employers add other provisions, such as non-disclosure agreements, into these documents. It’s advisable to have an attorney review these documents prior to you signing or agreeing to them.

If you’ve been presented with a severance agreement, then you may contact us to review your agreement. A severance agreement includes a number of provisions that create numerous obligations for the departing employee. Fortunately, severance agreements are often negotiable when you have an attorney represent you. In negotiating a severance agreement, you may be able to negotiate less restrictive provisions and maximize your severance pay or benefits.

Duty to Inform New Employer

Many employment agreements, especially non-compete, non-solicitation and intellectual property agreements, require you to inform your new employer about the restrictions contained in the agreement. The agreement may require you to provide a copy to your new employer prior to accepting any employment offer.

Some companies are notorious for enforcing these agreements. You may be surprised to discover that your former employer’s attorney has sent your employment agreement, with its duty to inform provision, to your new employer. Your new employer might then require you to get certain liability releases from your former employer before continuing your employment.

Contact Potomac Legal Group for Assistance in any Employment Matter

The employment attorneys at Potomac Legal Group can review your employment matter and assist you in developing the best strategy for limiting your liability and protecting your career. We have represented employees in numerous matters where employers have accused or sought damages from former employees for breach of employment agreements.

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