An agreement containing a restrictive covenant is an agreement in which one party agrees to limit his conduct in exchange for a benefit. Two common types of restrictive covenants include agreements not to compete and agreements not to solicit. A non-competition agreement is a contract that an individual, often an employee, enters into with another party, often an employer, in which the individual agrees not to offer or engage in services that are competitive with the other party. A non-solicitation agreement is a contract in which an individual, often an employee, enters into with another party, often an employer, in which the individual agrees not to poach employees and/or clients of the other party. Non-competition and non-solicitation agreements may be beneficial to employers because they offer protection for their business models, clients, and/or employees, which they may have spent years developing and training.
The laws governing non-competition and non-solicitation agreements vary from state to state. New York law generally recognizes these restrictive covenants as enforceable to the extent they are reasonable. For more information as to whether or not your restrictive covenants are enforceable, see Enforceability of Restrictive Covenants in New York.
There are several types of claims available to employers for a violation of a restrictive covenant that are commonly recognized by New York courts. See Employer Remedies for Violations of Restrictive Covenants in New York. One such claim is unjust enrichment.
Three elements must be asserted to establish a claim for unjust enrichment in New York; 1. The defendant derived a benefit; 2. The benefit that the defendant derived was at the plaintiff’s expense; and 3. The basic principles of fairness and equity require restitution. The benefit derived by the defendant may be either intentional or unintentional. For example, an employer can still assert a claim for unjust enrichment if the defendant received a benefit in error, rather than with malicious intent.
Often, employees and other individuals who are bound by restrictive covenants are given a benefit in exchange for agreeing to the restriction. For example, an employee may be offered severance in exchange for agreeing not to compete with an employer upon separation from the employer. An unjust enrichment claim is commonly asserted by employers when an individual violates their non-competition or non-solicitation agreement though they have received a benefit in exchange for compliance. The relief for these types of claims often includes a return of the benefit bestowed on the violating party, among other relief that may be just and appropriate under the circumstances.
If you are an employer seeking to enforce a restrictive covenant or a party who is subject to a restrictive covenant, contact Maya Murphy, P.C. at (203) 221-3100 for a complimentary consultation to discuss your case.