As mentioned in the prior post, I was in court in October (2016) and tried a non-compete case for my client. The judge ruled for us on all causes of action. My client’s former employer (Employer) sued him for breach of non-compete and non-solicitation agreements as well as for allegedly he breached his duty of loyalty. These claims presented several issues, which are likely to come up in other cases. One such issue is how to pay for attorney’s fees.
A former employee sued by a former employer faces the issue of how to pay for a defense. I do my best to make a defense affordable. Of course, much of the costs is not really up to me. An aggressive defendant can increase the time spent on litigation. A fairly recent case attorneys’ fees exceeded $130,000 (over 18 months of litigation and a one week trial). This is an outlier but cases such as this involve lots of claimed damages (millions), clients who can afford to go toe-to-toe with their former company, bad blood between the parties, and lots of documents. However, in the October 2016 case, the fees and costs were about $29,000 spread out over almost two years.
Anyway you look at it, twenty-nine thousand dollars ($29,000) is a lot of money. Most people cannot afford to pay this sort of money. How did my client manage it? When you factor in the $7500 retainer up front, which paid for the first 4-5 months of litigation, this left $21,500 spread the remaining 17 months or $1,260/month. Since this was a business expense, he was able to pay with pre-tax dollars and for several months was able to put the expense on his business credit card. Fortunately, his business did well enough to absorb these costs spread out over time.
However, my client realized that there was a cost of compliance. He calculated that abandoning his established territory would cost him more than a $100,000 over two years. Factoring in the risk of losing (which we thought was minimal — at first –), he decided that he had no choice but to fight. And so, he did.
On average, non-compete cases cost $10,000 or less. Many times an employer is seeking an injunction, which if the employer loses may result in a quicker resolution. Many times the issues are less factual and more legal. Legal issues require less discovery, which can be the most costly part of litigation. We are able to be efficient in handling the legal issues, and quick and earlier victory can signal to the employer the battle is futile. Of course, this is not always the case.
Many times the best course is not to sign a non-compete at all. The next option is to attempt to negotiate the terms in advance and with the assistance of legal counsel. Perhaps there are terms that both parties can live with: a compromise non-compete. If not, then the employee will need to abide by the agreement she signs after employment ends assuming it is reasonable. However, if the non-compete is unreasonable and unlawful, then folks should plan ahead: Budget and save for the legal fight. Finally, hiring a lawyer with experience to ensure that you get the most efficient legal representation possible. It doesn’t hurt if that lawyer also understands the nature of the battle and is committed to the cause.