When one thinks of a “reasonable” temporal scope for a restrictive covenant between employer and employee, usually that period is measured in months or years, not decades. But as a recent North Carolina decision reminds us, context is everything, and a 10-year restriction can be enforceable in the right
Articles Discussing Restrictive Covenants In North Carolina.
September 20, 2017
Peter G. Pappas
In American Air Filter Co., Inc. v. Price, No. 16 CvS 13610, 2017 WL 2797794 (N.C. Super. Ct. June 26, 2017), the plaintiff’s former employee signed an employment agreement that renewed automatically each year. The agreement contained a non-compete covenant. The plaintiff alleged that its former employee received consideration for each renewing year in the form of base salary, commissions and bonuses. Significantly, however, the complaint did not allege that the former employee’s salary or bonus was increased in conjunction with the alleged annual renewals. Id., 2017 WL 2797794, at *2. Therefore, in deciding the plaintiff’s claim seeking to enforce the employment agreement’s covenant not to complete against the former employee, the Business Court concluded that there was no consideration to support the agreement at the time of the employee’s resignation in 2016 and therefore, it dismissed the claim. Id., 2017 WL 2797794, at *7-8.
Take everything you thought you knew about North Carolina’s “blue pencil” doctrine and scribble it out – well, at least as it pertains to non-compete agreements between parties to the sale of a business.