Friday, March 26, 2010
Colorado Finds Continued Employment Is Not Sufficient Consideration for Afterthought Non-Compete (Lucht's Concrete Pumping v. Horner)
Colorado has joined the list of states to hold that an existing employee's continued employment does not constitute valid consideration for signing a non-compete agreement.
So-called "afterthought" covenants are often put in place by an employer after it realizes an existing at-will employee may have influence over customer relationships or increased access to sensitive company information. A fair number of states, including Washington, South Carolina, and Minnesota, hold that an at-will employee is not bound by an afterthought covenant unless some consideration is provided to him or her. These courts reason that an employer's forebearance from discharging an at-will employee does not rise to the level of contractual consideration.
Increased pay or new benefits will, of course, but it is not clear how substantial those perks have to be. In Illinois, the appellate courts have, with no real clarity, held that only continued employment for a "substantial period of time" will constitute sufficient consideration. The length of time that the employee remains on the job, along with the manner in which the employment ends, are relevant factors for Illinois courts to consider when examining the validity of afterthought covenants.
The Supreme Court of Colorado has granted certiorari in the case only as to the consideration issue.
Court: Court of Appeals of Colorado, Division One
Opinion Date: 6/11/09
Cite: Lucht's Concrete Pumping, Inc. v. Horner, 224 P.3d 355 (Colo. Ct. App. 2009)