Non-Compete Agreement After Company Acquisition
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Non-Compete Agreement After Company Acquisition
My company recently went through an acquisition by a much larger company. I am marketing director and primary marketing strategist. I am being required to sign a 2-year non-compete agreement by the new company. What stops the new company from acquiring all of my current work, strategy and creative then letting me go with no guarantee? Do I have an leg to stand on in negotiating some kind of severance clause to my contract?
Asked on November 11, 2016 under Employment Labor Law, Arizona
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 7 years ago | Contributor
1) Your employer--including a "new" employer who just acquired the company you worked for--can require you to sign a non-competition agreement at any time and can terminate you if you won't. If they do terminate you, you would not be entitled to severance unless you already had an in-effect employment contract guarantying you severance.
2) If you sign a non-compete in exchange only for continuing to work there, then if they terminate you other than for cause (i.e. you are not fired for provable wrongdoing, like absenteeism, theft, violating known company policy, etc.), the non-competition does not bind--thas is, if fired for other than cause, you are free to compete. This is because:
a) The continued employment is the "consideration" (or thing of value) you get for agreeing to not compete; all contracts require consideration; if they take away the consideration (terminate you), their is nothing to bind the agreement; and
b) The agreement is effectively an agreement to not go and compete with them as long as they are willing to employ you; if they terminate you, they breach their obligations in a material or important way, and that breach lets you treat the agreement as terminated.
3) If, however, you receive something in addition to employment for signing the agreement, like some sort of bonus or payment for signing, then that payment, etc. functions as independent consideration and the agreement would still be enforceable against you even if you are terminated.
4) You can always ask for or try to negotiate severance, but they are not required to provide it--and getting a guaranty of severance would likely constitute consideration that would let the agreement be enforced even if you are terminated, so getting a guaranty of severance in this case is potentially a double-edged sword.
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