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Continued employment enough to bind employees to noncompete pact

by on
in Employment Law,Human Resources

You may be afraid that your top salesperson or IT whiz is about to jump ship to the competition, but you failed to sign those employees to noncompete agreements when you hired them. Ideally, those agreements should have been signed on day one. But it may not be too late to protect your organization from being raided by a competitor.

You can legally require your current employees to sign noncompete agreements that limit how soon after leaving your firm they can jump to a competitor.To make the agreement stick, give employees something of value in exchange for signing the pact. As the following case shows, continued employment is enough consideration to make the agreement binding.

Recent case: Printing company employee Stacey Kelly quickly became a star performer and was promoted regularly. The company, recognizing Kelly was a real asset, asked her to sign a noncompete agreement a year into her tenure. It prohibited her from working for a direct competitor if she quit.

Kelly still left and went to work for a competitor. The printing company sued for breach of contract. Kelly claimed the noncompete agreement wasn't legal because she signed it after she was hired. But the Vermont Supreme Court sided with the company and upheld the noncompete, saying Kelly's continued employment was all that was needed to bind her. (Summit 7 v. Kelly, Vermont Supreme Court, No. 2004-242, 2005)

Final note: Noncompetes have another advantage: If your competitors know that your employees routinely sign noncompete pacts, they'll be less likely to cherry-pick your employees away. That's because you can sue such "raiders" for inducing employees to break their noncompete contracts.

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