When can you enforce a non-compete agreement if an employee leaves to work for a competitor? The Kentucky Court of Appeals ruled recently that you can enforce a non-compete agreement. But there are mitigating factors that a court should consider when ruling on enforcing a non-compete.
There are two important principles in this decision. The principles are:
1. You don’t have to give an employee any payment to sign a non-compete. Continued employment is sufficient consideration.
2. Under the “blue pencil rule,” the trial court may not only revise the terms of a non-competition agreement but may also supply missing terms (for example, a reasonable geographical limitation).
We’re providing a full case outline for our clients that you can find here:
Case summary
The case is Charles T. Creech, Inc. v. Donald Brown.
Charles T. Creech, Inc. is a Lexington-based company that sells hay and straw. Donald Brown signed a non-competition agreement while he worked for Creech. The agreement prohibited Brown from competing for three years after leaving Creech and contained no geographical limitation. Brown left Creech to work for a competitor.
Creech filed suit in Fayette Circuit Court against Brown to enforce the noncompete agreement and against Brown’s new employer for tortious interference. The circuit court granted summary judgment in favor of Brown and his new employer. Creech appealed. The Court of Appeals found that issues of fact existed, and it reversed and remanded for further proceedings. In a lengthy opinion, the Kentucky Court of Appeals provided a useful summary of Kentucky law on noncompetition agreements. You can read the entire opinion at the link above.