Non-Competes in Fixed Term Agreements: Special Care Required


Special caution is required concerning restrictive covenants that are ancillary to employment agreements for a fixed term (as opposed to an employment agreement for an at-will employee). Whether such covenants may be enforced could depend upon: (1) written renewal of the employment agreement upon expiration; and/or (2) the inclusion of language expressly stating that restrictive covenants contained in the agreement survive termination of the agreement. Consider the following hypothetical:

A senior executive signs an employment agreement providing her with a fixed term of employment for two years from the date the agreement was executed. The agreement contains a restrictive covenant that applies for one year following expiration of the agreement. Upon the expiration of the two-year term, the company is negotiating the terms of a new employment agreement with the executive. As sometimes happens, the negotiations drag on for a period of months, sometimes actively, and sometimes not at all. During this drawn out and ongoing period of negotiations, the executive continues to serve and is compensated according to the terms of the expired employment agreement. Everyone seems to be content with the status quo, and a year goes by. Ultimately, the negotiations fail, and the executive sets out for greener pastures with a competitor.

Please see full article below for more information.

LOADING PDF: If there are any problems, click here to download the file.

Written by:

Published In:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Fisher & Phillips LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.