Monday, April 20, 2009

Notice Provisions Can Impact Non-Compete Agreement's Enforceability (ZVUE v. Bauman)

Contract provisions detailing notice requirements for how a relationship is to be terminated run the gamut from non-existent to vague to overly detailed. Frequently, notice provisions are found in sale of business contracts and specify precisely how an employment or consulting contract will be terminated and whether a party has an opportunity to cure a claimed breach or performance issue. Notice provisions are less prevalent in run-of-the-mill employment contracts, but they sometimes still govern how an employee must be notified of his discharge and whether he is entitled to severance pay or disclosure of the reasons why he has been fired.

The case of ZVUE v. Bauman addresses the importance of complying with contract notice provisions when trying to enforce, or break, a non-compete clause. Though the case deals with myriad business and intellectual property issues arising out of the sale of entertainment websites, one particular issue dealt with the applicability of a customer non-compete. The clause did not apply if either party terminated the employment agreement "without cause." However, for the employee to avail himself of this right, he had to give notice of his intent to terminate to the company detailing the breach of the underlying asset purchase agreement and granting the company 10 days to cure the breach.

He failed to give the proper written notice and therefore was unable to claim his resignation was a termination "without cause." One can envision a number of circumstances in how a notice provision will impact the rights of either side. For instance, if an employment agreement provides an employee is entitled to written notice of his termination, and that notice is not provided, the employee has an argument the employer failed to abide by the terms of the agreement. The notice provision also may be tied directly to the non-compete. Though this often requires a careful parsing of the agreement and its several provisions, the employee will generally get the benefit of any contract ambiguity or drafting errors.

The Bauman case is just an example of how employers and their attorneys must think through each contract provision. Using standard contract terms may not work particularly well in non-competes, as they can have unintended consequences for employers.

Court: Supreme Court of New York, New York County
Opinion Date: 4/15/09
Cite: ZVUE Corp. v. Bauman, 2009 N.Y. Misc. LEXIS 861 (N.Y. Sup. Ct. Apr. 15, 2009)
Favors: N/A
Law: New York

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