Question
Case employment ended. The agreement had no geographicallimitations.Nearly five years later, in April 2002, Employer requested and Emplovee executed a Noncompetition and Confiden- tality Agreement
Case employment ended. The agreement had no geographicallimitations.Nearly five years later, in April 2002, Employer requested and Emplovee executed a "Noncompetition and Confiden- tality Agreement" (noncompete agreement). The noncom- pete agreement required Employee to refrain from accepting employment with a competitor for a period of three years within 75 miles of Employer's business in Tacoma, Washingion. Employee remained an "at will" employee and received no additional benefits. Employer incurred no additional obli-gations from the noncompete agreement. The noncompete agreement also contained clauses for confidentiality, sever- ability, and an award of attorneys' fees and costs.A few months later, in July 2002, Employer announced a new commission sales compensation schedule. The old schedule's threshold had paid commission when an employeegenerated sales of at least $25,000 for the month, while the new schedule required sales to exceed $60,000. Employee determined the new schedule would reduce his income byabout 25 percent and sought employment for a similar position elsewhere. On November 12, 2002, Emplover dis- covered Employee's intention to seek employment with acompetitor and terminated him. Emplover also sent a let- ter to the competitor interested in hiring Employee, stating its intent to enforce Employee's noncompete agreement. Thecompetitor did not hire Employee. Employee remains unem- ployed despite actively seeking a position similar to the one he held with Employer. The Employee sued the Employer:. The trial court ruled against the employee and the employee appealed to the state suprehe courtJUDGE IRELAND: . Issue 1. Is there consideration or the formation of a contract when an employee, already employed by the employer, executes a noncompete agree-ment but receives no new benefit and the employer incurs no further obligations? Employee claims that the noncompete agreement fails For lack of consideration; in other words, a contract was notformed. Employer contends that the noncompete agreement is enforceable because future and continued employment and/or job training served as the Employer's consideration in exchange for Employee's execution of the noncompete agreement. ... The general rule in Washington is that con-sideration exists if the employee enters into a noncompete agreement when he or she is first hired.A noncompele agreement entered into after employment will be enforcedif it is supported by independent consideration. Inde- pendent, additional consideration is required for the valid formation of a modification or subsequent agreement.There is no consideration when "one party is to perform some additional obligation while the other party is sim-ply to perform that which he promised in the original contract." [Citations omitted]. Independent consideration may include increased wages, a promotion, a bonus,fixed term of employment, or perhaps access to protected information.Independent consideration involves new promises or obligations previously not required of theparties... In the present case, Employer contends that continued employment served as consideration for the 2002 noncom- pete agreement.. [but] Employee's noncompete agree- ment made no promises as to future employment and wages. Further, during deposition, Robin Pollard, Employer's president, conceded that "no extra benefits or consideration or promises [were] made to [Employee] it he signed thenoncompete." Consideration is a bargained-for exchange of promises.A comparison of the status of the employer before and after the noncompete agreement confirms that the 2002noncompete agreement was entered into without consider-ation. Employer did not incur additional duties or obliga- tions from the noncompete agreement. Prior to executionof the 2002 noncompete agreement, Employee was an "atwill" Employee. After Employee executed the noncom- pete agreement, he still remained an "at will"employee terminable at Employer's pleasure. We hold that contin- ed employment in this case did not serve as consideration by Employer in exchange for Employee's promise not tocompete. We hold that the 2002 noncompete agreement lackedindependent consideration and is not enforceable against the Employec.
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