Labor & Employment Developments Blog

Companies with Kentucky employees need to review their non-competition agreements.  The Kentucky Supreme Court recently issued a significant decision in Charles T. Creech, Inc. v. Brown and Standlee Hay Company, Inc. regarding sufficient consideration to support non-competition and non-solicitation agreements.  “Consideration” is the value that employees receive in return for agreeing to the terms of non-competition agreements. At the beginning of the employment relationship, the job offer itself provides the consideration to support these agreements.  Current employees, however, already have their jobs and arguably are not receiving anything new for having to sign the agreements. The Kentucky Supreme Court decided that in most instances, continued employment without other changes in terms and conditions of employment is no longer sufficient consideration for employees to enter into non-competition agreements.  This change may affect the enforceability of agreements for your employees in Kentucky.

The Kentucky Supreme Court in Creech determined that a former employee did not receive sufficient consideration based on several factors.  The court noted the employee received nothing new of value after executing the agreement:  no raise, bonus, specialized training, or promotion.  He received neither better nor additional employment rights that he would not otherwise have had.  The agreement was not part of an overall employment contract, and the employee had worked for many years without a non-competition agreement.  Interestingly, the court noted that the employee was not threatened with the loss of his job if he refused to sign the agreement.

Employers with employees in Kentucky may want to consider reviewing whether they are providing any additional benefits to current employees when requiring them to sign non-competition agreements.  For non-competition agreements that were obtained sometime after the start of employment, ensure that employees were given additional consideration (raise, bonus, promotion, specialized training, or some other benefit) at the time the agreements were signed.  If the consideration is not readily apparent from the agreement or from information in a personnel file, then you may want to consider requiring current employees to resign them with the consideration spelled out in the agreements.

If you have any questions about drafting or enforcing your non-competition and non-solicitation agreements, please contact us.