A covenant not to compete, like any other contract, must be supported by consideration. Any benefit to a promisor or any detriment to a promisee at the time of the contract, no matter how slight, constitutes adequate consideration. A "peppercorn" is sufficient. Except in extreme circumstances, such as those involving allegations of unconscionability, a court should not judge or attempt to assess the adequacy of the consideration. The court will not inquire into the adequacy of the consideration, the exact value of the consideration the court ought not, and in the nature of things cannot, undertake to measure. Therefore, only some consideration needs to be found, regardless of its relative value, to support a covenant not to compete.
Lucht's Concrete Pumping, Inc., the petitioner, is a Colorado Corporation in the concrete pumping business which begun to expand into the Summit County area in 2001. To implement its expansion, the petitioner hired the respondent Tracy Horner as the mountain division manager on an at-will basis beginning in 2001, a position which gave the respondent the responsibility to establish and maintain the relationships in the mountain region upon which the petitioner relied for business. In 2003, the respondent signed a noncompetition agreement which stated that in the event that the respondent left his position as the mountain division manager, he would not "directly or indirectly solicit, induce, recruit or encourage any of the petitioner’s employees or customers to leave the petitioner’s business for twelve months following his termination. The agreement also stated that the respondent cannot divulge any trade secrets or other confidential information to any future employer. The respondent was not offered any pay increase, promotion, or additional benefits at the time he signed the agreement. In 2004, the respondent resigned as the manager of the petitioner’s business and began working for Everist, a company which started to enter into the concrete pumping business in the mountain region shortly after the respondent became its pumping manager – this directly competed with the petitioner’s business. Therefore, the petitioner sued the respondent for breach of contract, breach of duty of loyalty, breach of fiduciary duty, and misappropriation of trade value. It also sued Everist for intentional interference with contract, aiding and abetting a breach of duty of loyalty, aiding and abetting a breach of fiduciary duty, and misappropriation of trade value. The respondent moved for a summary judgment which the trial court has granted on the grounds that the noncompetition agreement was unenforceable due to lack of consideration.
If an employer continues the employment of an existing at-will employee, is it to be considered as an adequate consideration to support a noncompetition agreement?
The Court held that an employer that forbears from terminating an existing at-will employee forbears from exercising a legal right, and that therefore such forbearance constitutes adequate consideration for a noncompetition agreement. By virtue of the nature of at-will employment itself, the presentation of the agreement was an offer to renegotiate the terms of the employee's at-will employment, which the employee accepted by continuing to work.