If I signed a no compete contract with my employer but he just sold the business and terminated my employment, am I still bound by the agreement?

Asked on August 15, 2015 under Employment Labor Law, Michigan

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

If you were terminated, then no--you would not be bound *except* as indicated below. For a contract to be valid, there must "consideration," or something (or a promise) of value on each side. In a non-competition agreement, the consideration for your agreement to not compete is employment: if your employment is terminated, there is then no consideration to support your promise to not compete. (Or alternately, it can be viewed as a breach of the contract by your employer: his obligation is to employ you, your obligation is to not compete, but by terminating you, he breached his obligations.)

The exception would be if, in addition to or instead of employment, you received something else of value in exchange for your promise to not compete, such as, say, some separate bonus or other payment just for signing the non-compete. In that case, because you received something else of value, the agreement would still be enforceable, since that other thing of value provided the consideration.


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