Agreements need to be updated with job changes
Published 09/10/04

If an employee signs a non-compete agreement with its employer and her job substantially changes, it is possible she may have a defense to enforcement of the prior non-compete she signed.

This point was illustrated in a Massachusetts Superior Court case of Lycos, Inc. v. Lincoln Jackson & Young Mi Chun The Middlesex County Superior Court Judge on August 24, 2004 denied Lycos, Inc.’s request to prohibit its former employee Young Mi Chun from competing with Lycos in violation of her non-compete agreement.

The Court specifically found that when Chun signed her non-compete agreement in March 2000 her position at Lycos was a project manager. After a series of promotions she ended up being a senior product manager with more job responsibilities. Chun did not sign a new non-compete agreement and later left to work for a direct competitor, Ask Jeeves, Inc.

The Court’s ruling on Lycos’ request to preliminary prohibit Chun from working at Ask Jeeves, Inc. found that the non-compete agreement signed in 2000 was voided because there was a material change in the employment relationship between Chun and Lycos and because Chun did not sign a offer letter presented by Lycos which made reference to incorporating the previous non-compete agreement.

The Court found that under Massachusetts law, each time an employee’s relationship with an employer changes materially such that they entered into a new employment relationship, a new restrictive covenant not to compete must be signed. The result was Lycos’ failure to get Chun to sign a new non-compete agreement, or to sign an agreement acknowledging her obligations under the old non-compete after her employment relationship substantially changed resulted in Lycos not be able to prohibit Chun from competing with it.

While continued employment of an at-will employee can be sufficient consideration for a non-compete agreement, it may be prudent for an employer who wishes to have their non-compete agreements enforceable against an employee who has a job promotion to have that employee sign a new non-compete, or at least an agreement acknowledging to be bound by the prior non-compete agreement as a condition for the promotion.

While it is unclear whether a New Hampshire Court would likewise void a previous employment non-compete because of a material change in the job of the employee, the judge may find such an argument persuasive since the bargained for consideration of continuing at-will employment in a particular job substantially changes with a material change in the employment relationship.

J. Daniel Marr is a director and shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and business persons on a variety of legal issues, including employment, and advocating on their behalf. You can reach Attorney Marr by e-mail at: dmarr@hamker.com

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