The consideration given for non-competition agreements is often access to confidential information
Employers should be careful about having incumbent employees sign off on noncompetes without offering additional consideration to support the agreement. If an employee leaves the company, competes with the company, and is then sued to enforce the noncompete, he may argue that he received no new confidential information so there was no valid “consideration” for the noncompete.
Employers should ensure the employee receives monetary compensation, or some other form of consideration for the noncompete in the termination agreement, and that the employee has acknowledged receipt of it.
Takeaway:
- A non-compete agreement will not be enforceable without valid consideration.