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Continued employment may be enough to make noncompetes legal

by on
in Employment Law,Human Resources

If you ask employees to sign an agreement not to compete with your organization for a certain length of time after they leave, the agreement isn't binding unless you offer the employee something in return for signing it.

That "something" can be extra pay, a bonus, a promotion or better benefits. But in some states, as in the following Ohio case, continued employment is sufficient consideration to enforce noncompete agreements. So the only thing an employee receives in return is the right to show up for work another day.

Key point: State laws vary greatly on this issue. Some require you to offer something more tangible than continued employment to seal a noncompete deal. Others require you to jump even higher legal hurdles. So always consult with your attorney to make sure your pact passes muster.

Recent case: After three years at a temp agency, the firm asked Lee Columber to sign a noncompete pact that banned him from competing for three years after his departure. The company didn't offer Columber anything in return for signing. Still, he signed and stayed for 10 years until the company fired him.

Shortly after, he opened his own temp agency. His former company sued to enforce the noncompete. Columber said the pact was unenforceable because he hadn't received any consideration in exchange for signing it.

Ruling: The Ohio Supreme Court sided with the temp agency, saying Columber was bound by the noncompete because his continued employment was adequate consideration. The court said that presenting a noncompete pact to an at-will employee is a "proposal to renegotiate the terms of the parties' at-will employment." (Lake Land Employment Group v. Columber, No. 2002-2069, 2004)

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