At-will employment is contractual in nature. In such a relationship, the employee agrees to perform work under the direction and control of the employer, and the employer agrees to pay the employee at an agreed rate. Moreover, either an employer or an employee in a pure at-will employment relationship may legally terminate the employment relationship at any time and for any reason.
The former employer filed a complaint asserting that its former employee had breached a noncompetition agreement the parties had executed. The agreement, signed three years after he started working for the former employer, provided that he would abide by certain time and geographical restrictions in establishing a competing business after his employment terminated. The former employer claimed that his employment had terminated several years after the agreement was signed and that he thereafter violated the terms of it. The former employer sought money damages and an order prohibiting him from violating the noncompetition agreement. The former employee admitted he had signed the noncompetition agreement and that he had started a competing corporation following his termination; however, he asserted the agreement was unenforceable due to a lack of consideration. The trial court agreed with the former employee and granted his summary judgment motion. The appellate court affirmed.
Is continued employment alone sufficient consideration to support a covenant-not-to-compete agreement with an at-will employee entered into after employment has already begun?
The state supreme court found the former employer's forbearance from discharging him while he was employed by it served as consideration to support the noncompetition agreement. At-will employment is contractual in nature. Either an employer or an employee in a pure at-will employment relationship may legally terminate the employment relationship at any time and for any reason. The presentation of a noncompetition agreement by an employer to an at-will employee is, in effect, a proposal to renegotiate the terms of the parties' at-will employment. Where an employer makes such a proposal by presenting his employee with a noncompetition agreement and the employee assents to it, thereby accepting continued employment on new terms, consideration supporting the noncompetition agreement exists. The employee's assent to the agreement is given in exchange for forbearance on the part of the employer from terminating the employee.