Friday, February 12, 2010
Equitable Extension Remedy Approved Under Maryland Law (TEKsystems, Inc v. Bolton)
The equitable extension remedy is a device that allows a court to give an employer the full benefit of the bargain if an employee is found to violate a valid restrictive covenant. In many non-compete cases, particularly those where no immediate restraining order is sought, an employee may continue to violate the non-compete covenant while the litigation is pending.
Employers seeking to enforce the agreement therefore will usually have to live with some actual competition until a court orders the employee not to work in a certain capacity or not to cultivate certain accounts. The extension remedy is a means to correct the period of time during which an employee is in actual breach.
In many states, like Illinois, the extension remedy must appear in the contract. From the employer's perspective, it is far more preferable to have a bargained-for remedy that gives it the ability to extend the non-compete for any period of time in which the employee is in breach. However, in the absence of a contractual clause specifically empowering the courts to extend the non-compete term, employers often argue for such an extension under the courts' inherent power to achieve equity.
In TEKsystems v. Bolton, a federal district court determined that Maryland law allowed for such an equitable extension, even in the absence of a contract provision granting the employer this remedy. That case, which involved the technology staffing industry, held that an 18-month, 50-mile industry non-compete covenant was valid and enforceable against a Jonathan Bolton, a Director of Strategic Accounts who developed a strong reputation and successful track record with financial services firms in New York.
The court therefore imposed an 18-month injunction against him following entry of summary judgment.
Court: United States District Court for the District of Maryland
Opinion Date: 2/4/10
Cite: TEKsystems, Inc. v. Bolton, 2010 U.S. Dist. LEXIS 9651 (D. Md. Feb. 4, 2010)