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Breaching employment contract can nullify noncompete clause

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in Employment Law,Human Resources

The best way to protect against employee poaching—and against employees using your organization as a training ground to start their own competing firm—is with a solid employment contract and noncompete agreement.

But take note of this important point: All the legal protection and competitive advantage you’ve worked so hard to ensure will mean nothing if you breach the agreement first.

For example, if you change the employee’s benefits, job duties or compensation plan, a court may find you breached the employment contract first and rule that the deal is off. That would give your ex-employee free rein to compete against you.

Case in point: Jeffrey Marschuetz, a salesman for Supermarket Merchandising and Supply, signed a noncompete agreement as a condition of his continued employment. It prevented Marschuetz from working in competition with the company for two years after leaving. The agreement said any modifications had to be in writing.

Later, the company made three policy changes that altered how much it paid Marschuetz. He quit and went to work for the competition.

Supermarket Merchandising sued Marschuetz to enforce the noncompete agreement. But an appeals court dismissed the lawsuit and invalidated the entire contract, reasoning that the company breached it first by making changes to Marschuetz’s employment without obtaining his written agreement. (Supermarket Merchandising and Supply v. Marschuetz, No. ED-86393, Missouri Court of Appeals, 2006)

Final tip: Because contract-law details differ from state to state, always have an attorney review your noncompetes.  

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