What is the validity of a non-compete agreement if your company closes?
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What is the validity of a non-compete agreement if your company closes?
I work for a consumer friendly finance company, that is part of a larger umbrella company that doesn’t have any other consumer friendly product providing company’s. We signed a non-compete agreement upon hire but now our company is closing its doors. Is it still valid, the non-compete, or due to the circumstances?
Asked on August 10, 2016 under Employment Labor Law, Georgia
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 7 years ago | Contributor
1) If you involuntarily lose you jobs, such as due to your company closing, the non-compete is no longer enforceable against you unless you received something of value other than employment in exchange for signing it--e.g. a bonus of some kind. If employment was the only "consideration" for the agreement, then when you lose the job, there is no more consideration to make the agreement binding.
2) If the agreement was with the unit being closed (i.e. with that LLC or corporation), then unless the agreement was specifically assigned to a still-existing company (like the umbrella organization), then even if the agreement would still have been enforceable (e.g. there had been consideration for it; see above), it is no longer enforceable because the part which could enforce it no longer exists.
So it appears very unlikely that the agreement could be enforced after closing and your job loss.
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