Problems With Getting Current Employees to Sign Non Compete Agreements

Let’s say you are in a business or industry where noncompete agreements may benefit or protect you. You certainly know that noncompete agreements are legal, and you have a sense that most if not all of your employees would sign them if you asked (or required) them.

The problem is that your employees are currently your employees. You have already hired them and they are already working—some are essential parts of your business. How can you get them to sign noncompete agreements? What is the “threat” if they do not sign?

Lack of Consideration

The problem with just giving employees noncompete agreements when they are still employees, is that many cases and courts say that in that situation there is no consideration for the noncompete agreement.

In other words, the employee is giving up something (the right to go work elsewhere), but not getting anything in return for giving that right up. Vice versa, the employer is getting the benefit of noncompete agreements, and not giving anything up, or giving anything to the employee for their sacrifice of this right that they would otherwise have in the absence of the noncompete agreement.

Continued Employment

One option commonly used by many employers is to make continued employment the consideration. In other words, telling employees “I will continue to employ you if you sign this noncompete agreement.”

Many courts have said that the promise of continuing employment is sufficient consideration to support the validity of a nondisclosure agreement. But more and more, some courts have found troubles with this as well: the promise of continued employment in return for signing the noncompete is illusory.

Illusory Promises

An illusory promise is a contract or promise where one party is not really bound by the agreement, but the other is. So, for example, if I said “pay me $100 and I will make you a painting as soon as I have time and if I have the right materials,” this wouldn’t really be a promise—I am not bound to do anything. There is no objective criteria that binds me to make the painting or says when I must make it.

The same applies to noncompete agreements where continued employment is the consideration.

The problem is that when an employer says “I will continue to employ you,” that doesn’t actually promise the employee anything, because Florida is an at-will employment state, and there is nothing stopping the employer from firing the employee at any time, despite the contract.

If the employee really is just being given the promise of continued employment, that promise has no provisions or parameters—it doesn’t say for how long, or give the employee any right to sue if he or she were to be fired the day after signing the noncompete agreement.

There are ways to get employees to sign noncompete agreements, even after they are hired, but it’s not something that should be done without a business or employment attorney. Call the West Palm Beach business litigation lawyers at Pike & Lustig today.

Sources:

gpo.gov/fdsys/pkg/USCOURTS-moed-4_16-cv-01367/pdf/USCOURTS-moed-4_16-cv-01367-0.pdf

scholar.google.com/scholar_case?case=13527173503952234778&q=Fifield+v.+Premier+Dealership+Servs.&hl=en&as_sdt=4,14