Question about a Non-Compete and Harassment from former employer

Hi and thanks for any help. I filed this under Contracts, but it kind of combines a non-compete and harassment in one big issue.

In 2005 my wife signed (against my advice not to) a non-compete which stated that she could not work in any capacity for any business that remotely competed with her employer (a Dance Studio) within a 5 mile radius of her employer's business as long as that business existed.

In 2008 my wife decided she could no longer stand working for this person and quit. However, she wanted to start her own studio, so we contacted a lawyer who advised that we were probably OK if we waited for at least a year and did not solicit her former employer's customers. We (kind of) took this advice and last year only did private individual instruction out of our home. However, this past summer (13 months after quitting) customers of my wife's former employer found out about my wife's private instruction and began distributing information among themselves. In addition to this my wife was recruiting her own new customers as well. It got to the point that we had to rent space as our home was too small. All told about 8-10 students left my wife's former employer to come take classes from my wife.

Everything seemed OK until yesterday one of the moms who had brought her children to my wife's studio was called by my wife's former employer. The former employer was bad mouthing my wife to the point of slander, and she was using the non-compete as evidence of how evil my wife is.

And now today we received a certified letter from this woman (the former employer), basically ripping my wife apart and threatening a lawsuit.

I told my wife to blow it off, but I'm wondering if we shouldn't get some sort of restraining order. Is there anything legal we can do to keep this woman away from my wife's customers & business?

I understand we're not in the best of situations especially with the fact that my wife signed that ridiculous non-compete, but there are many other things this former employer has done that are far from legal. For instance, during my wife's time there she earned about 8K a year and worked a schedule. She was paid monthly in cash, and never received a W2 or 1099. We reported this money as income on our tax returns, so as to follow the law as best we could.

Again, any advice would be appreciated.
Thanks
Doug


Bruce and Neil: thanks for the advice. I would not want to deal directly with this woman (the former employer) as she is not rational, and she lies and mis-states facts. Her conduct currently is slanderous (in my opinion anyway regardless of the non-compete). When we deal with her it will be through a lawyer only.