Avoiding lawsuit through mediation

Navigating the Legal Maze: Litigating Restrictive Covenants and the Crucial Role of Early-Stage Mediation

In the realm of employment contracts, restrictive covenants often serve as essential tools for protecting a company’s interests. However, when disputes arise surrounding these clauses, the journey through litigation can be a challenging and costly endeavor. In such circumstances, the value of early-stage mediation cannot be overstated, offering a strategic pathway towards resolution that benefits all parties involved.

Consider the case of Johnson & Co., a large insurance company known for its innovative advertising campaigns in the legal field and unique approach to marketing strategies. Emma, a talented in-house graphic designer for the company, had been an integral part of the team for just shy of 2 years, who had contributed significantly to the company’s success. However, when Emma decided to pursue an opportunity with an outside advertising agency, tensions began to rise.

The employment contract Emma had signed with Johnson & Co. included a restrictive covenant requiring her to pay back training costs if she left prior to 2 years, prohibiting her from contacting customers of the company, not to solicit other employees away from the company and requiring her not to disclose certain trade secrets of the company.  Emma proceeded with her new job.  She began contacting friends and family she knew personally, attempting to gain more business for her advertising agency.  However, many of these same friends and family were also on the client list of the company, prompting Johnson & Co. to pursue legal action to enforce the agreement.

As the dispute escalated, both parties found themselves on the brink of protracted litigation, with mounting legal fees and potential reputational damage looming overhead. Recognizing the need for a more constructive approach, they opted to explore mediation as a means of finding common ground.

In the mediation sessions that followed, facilitated by an experienced mediator, Emma and representatives from Johnson & Co. were able to engage in open dialogue, airing their grievances and concerns in a neutral environment.  Through this process, they unearthed underlying issues driving the conflict and identified areas of potential compromise.  Crucially, early-stage mediation allowed both parties to preserve valuable relationships and mitigate the risks associated with prolonged litigation.  Further, the mediation process yielded a mutually acceptable agreement tailored to the unique circumstances of the case.

Emma was able to present to the company that she did not have access to or take a copy of the client lists of the company, all lists had stayed confidential at the company, and she had not made copies. She showed the company a list of people she knew personally so they could be assured the contacts she was using were personal friends and family that these same people just so happened to also be on the company’s client list. She reassured and agreed to adhere to the terms of the confidentiality agreement, and she would not provide any names or contact information of clients she knew only as a result of having worked at the company to anyone outside of the firm, and that she would not solicit other employees of the company to join her company.  This gave the company reassurance and confidence that she was not going to disclose the company’s private client lists or destroy the confidentiality terms the company has made with its clients.   Therefore, the company agreed to withdraw their claim against Emma regarding the breach of confidentiality claim. 

The company was able to express that they had taken a chance on an employee with no graphic design experience, that they had paid for her graphic design education, and had to train her to understand their unique approach to advertising campaigns and marketing strategies.  The company believed they were not only investing in her, but they were investing in an employee that would be a long-term asset to the company.  They were disappointed that she had not stayed another 3 months to finish her agreed term.  Emma was able to express that she had gone above and beyond for the company on many occasions working outside the bounds of her employment agreement duties and should not have to pay the entire large schooling debt when she was only 3 months shy of meeting the term she agreed to in the restrictive covenant.  As a result of this open dialogue Johnson & Co recognized Emma’s contributions to the company and expressed a willingness to explore alternative settlement possibilities.  They agreed to a prorated repayment of the training costs and Emma’s release of a copyrighted design that she had designed after her employment that could greatly help the company to continue a unique marketing campaign. 

Both parties were able to come up with solutions that aligned with their long-term goals, career goals and company goals within reasonable bounds. 

The resolution achieved through early-stage mediation not only spared both parties the time, expense, and uncertainty associated with litigation but also preserved their respective reputations within the industry. By prioritizing open communication, cooperation, and creative problem-solving, Emma and Johnson & Co. demonstrated a commitment to constructive conflict resolution that served their interests far better than adversarial proceedings ever could.

The case of Johnson & Co. underscores the invaluable role of early-stage mediation in navigating disputes arising from restrictive covenants. Rather than resorting to litigation as a first recourse, parties embroiled in such conflicts stand to benefit greatly from engaging in mediation, where they can collaboratively explore solutions that address their concerns while preserving relationships and minimizing risk. In the complex landscape of employment law, the path to resolution often lies not in confrontation but in conversation.