March 27, 2012 Articles

When Can a Former Employee Challenge a Restrictive Covenant?

The question of how to deal with a potentially invalid or overbroad restrictive covenant is a difficult one.

By Michael J. Miles – March 27, 2012

The requirement of Article III, Section 2 of the United States Constitution that an actual “case or controversy” exist before a party can bring a lawsuit and seek relief from the courts forces parties to be reactive in protecting their rights. In the world of employment law, this traditionally meant that a former employee could question the validity of a restrictive covenant, such as a noncompetition or non-solicitation agreement with his or her former employer, only by breaching it and defending against a subsequent action by the former employer on the grounds that the restrictive covenant was invalid.

The passage of the Declaratory Judgment Act, 28 U.S.C. § 2201, along with the development of the Uniform Declaratory Judgment Act, which has been enacted in one form or another by 41 states, relieved this concern to a certain extent. These laws allow parties to be proactive in protecting their rights by filing an action, before the breach of an agreement, to seek a declaration of its scope or validity. Nonetheless, courts will still not issue advisory opinions.

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