Restrictive Covenant Is Enforced And Former Employee Is Enjoined From Soliciting Any Current Prospective Customers

In the employment agreement business litigation case of ADP Inc. vs. Lynch (D.N.J., 25-7-1371, the defendants John Halpin and Jordan Lynch sought reconsideration of an order that denied defendants motion to dismiss, or in the alternative, transfer venue; and partially granted a motion for a preliminary injunction filed by ADP LLC. Defendants are former employee of ADP. They allegedly entered employment agreements containing restrictive covenants. Halpin left ADP in late 2015, while Lynch left ADP in early 2016. Shortly thereafter, both defendants became employed by The Ultimate Software Group Inc. (“USG”), a company that provides services substantially similar to those provided by ADP, ADP filed suit alleging that defendants violated the restrictive covenant by virtue of their employment with USG. The court granted ADP’s motion for preliminary injunction, enjoining defendants from soliciting any current ADP customers whose identity defendants learned while employed at ADP. The court also enjoined defendants from using ADP’s confidential or proprietary information. However the court denied ADP’s request to enjoin defendants from working at USG altogether. In their motion for reconsideration in addition to arguing that the injunction should be dissolved for lack of personal jurisdiction, defendant argued that if they were to be enjoined, they should be enjoined only for soliciting clients that they had actually dealt with while at ADP. The court declined to reconsider its decision regarding the enforceability of the restrictive covenants. The court also rejected defendants challenge to the preliminary injunction and their request to limit the injunction. Employers have a legitimate interest in protecting their customer base, and defendants would infringe upon that inertest if they were able to solicit ADP’s customers, especially in light of the fact ADP particularly relied on long standing customer relationships in order to be successful.

Reference: Case & Analysis, New Jersey Law Journal, 222 N.J.L.J. 3091 (September 26, 2016)

Filed Under: Employment Agreement Litigation, Restrictive Covenants

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