March 25, 2019

March 22, 2019

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Sixth Circuit Greenlights Employer’s Broad Attorney Fee Provision

Employee restrictive covenant agreements often contain fee-shifting provisions entitling the employer to recover its attorneys’ fees if it “prevails” against the employee. But “prevailing” is a term of art in this context. Obtaining a TRO or preliminary injunction is not a final decision on the merits, so does obtaining a TRO or preliminary injunction trigger a fee-shifting provision? A recent case illustrates that an employer can sidestep this potentially thorny issue by using careful and thoughtful drafting.

In Kelly Services, Inc. v. De Steno, 2019 U.S. App. LEXIS 875 (6th Cir. Jan. 10, 2019), a Sixth Circuit panel upheld the lower court’s decision to enforce a broad attorneys’ fee provision and award Plaintiff Kelly Services over $72,000 in attorneys’ fees. In the lower court, Plaintiff sought attorneys’ fees after obtaining a preliminary injunction prohibiting Defendants from competing. The underlying provision did not require Plaintiff to ‘prevail’ before seeking fees. Rather, the provision required Defendants to pay Plaintiff’s attorneys’ fees “incurred by” enforcing the employment agreement.

The District Court interpreted the fee provision by its plain language and awarded Plaintiff attorneys’ fees “incurred” in seeking a preliminary injunction to enforce the employment agreement. The Sixth Circuit affirmed.

While the Sixth Circuit accepted the broad language of Plaintiff’s attorneys’ fee provision, it cautioned against potential abuse. The court noted, for example, that a fee award would be unreasonable in cases “made with little or no basis, or made for purposes of oppression or harassment …” under the guise of “enforcement.” Following the court’s ruling, employers should consider creating or revising attorneys’ fee provisions to broaden the scope and eliminate “prevailing party” language.

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About this Author

Brian Spang, Epstein Becker Law Firm, Chicago, Labor and Employment Attorney
Member

Brian Spang is a Member of the Firm in the Employment, Labor & Workforce Management practice, in the Chicago office of Epstein Becker Green. He has nearly 20 years of experience litigating on behalf of Fortune 50 companies, as well as representing, counseling, and advising Fortune 50 and mid- and small-sized employers on all aspects of employment law.

312-499-1462
Erica McKinney, Epstein Becker, labor and employment lawyer
Associate

ERICA R. McKINNEY is an Associate in the Employment, Labor & Workforce Management practice, in the Chicago office of Epstein Becker Green.

Ms. McKinney:

  • Represents clients in labor and employment law litigation matters involving harassment, discrimination, retaliation, breach of employment contracts, and tort claims
  • Counsels clients on all aspects of compliance with federal, state, and local laws affecting labor and employment relations
  • Drafts employment agreements, severance agreements, settlement agreements, confidentiality agreements, and restrictive covenants

Before joining Epstein Becker Green, Ms. McKinney served as a law clerk to the Honorable Margaret B. Seymour of the U.S. District Court for the District of South Carolina and the Honorable Zoe Bush of the Superior Court of the District of Columbia.

312-499-1401