If I sign a no-compete contract, can my employer themn fire me after I do?

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If I sign a no-compete contract, can my employer themn fire me after I do?

I work as a stylist and have been working for the company for about 4 years and they sold the salon and the new owners want us to sign one. However, I’m afraid they will fire me after I do. Is the contact only good for so long as the new owners own it or for the full term?

Asked on April 9, 2012 under Employment Labor Law, Indiana

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

A contract is made between two parties. It may, however, be taken over ("assumed by" or "assigned to") another party, if the contract itself does  not state that it is non-assignable. Hence, it is very likely that if someone new took over the salon, that the non-competition contract would be assigned to them; also, if the salon is a corporation ("inc.") or limited liability company ("LLC") and 1) the non-competition was made with the salon, and 2) someone new bought the corporation or LLC (and not just the assets), the noncompetition would remain in force, since the entity with which you contracted would still be in existence. Therefore, there is every reason to believe that the agreement would be enforceable even if the people who have you sign it sell to someone else.

As to what happens if you sign, then are fired:

1) First, check the terms of the agreement:  a non-competition agreement generally is not binding in the event of termination unless some severance is provided at termination. That is because the "consideration," or thing of value provided to bind the contract, is your employment; if you are terminated, there is a failure of consideration. Normally, unless there is some severance (which then would constitute the consideration), the noncompetiton would only apply if you quit or resign, but would be unenforceable if you were fired.

2) Also, all contracts have what's called the "implied covenant of good faith and fair dealing," or the obligation to not try to use the contract  to deny the other party the benefit of its bargain. Having you sign a non-competition agreement, then shortly thereafter firing you and trying to enforce the noncompetition against you, might be a violation of this covenant and render an otherwise valid agreement unenforceable.

The above is based on general legal principals. Since the specific language of the agreement and the facts of your situation are critical to understanding your rights and obligations, you should have  an attorney review the contract with you.


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