Is a non compete clause valid if the company has been purchased bysomeone else but the name is same?
Is a non compete clause valid if a previous company has been purchased since separation. A non compete clause was signed at the time of employment. The clause signed was for two years. The company has since been purchased by another company...but the name has remained the same. Is this clause still valid?
1 answer | asked Jan 5, 2010 10:51 AM [EST] | applies to Kansas
Answers (1)
The new owner will be able to enforce your non-competition agreement if:
1) it obtained the company from the old owner in a stock purchase or
2) it purchased the assets of the old owner and obtained a valid assignment of the old owner's rights under your non-competition agreement.
These are both factual questions. If the transaction was an asset purchase with an assignment of the non-competition agreement, a question remains whether Kansas law permits assignments of non-competition agreements. Some states, like Indiana, hold that non-competition agreements are "personal service contracts" and therefore cannot be assigned. Other states treat non-competition agreements like normal contracts, which either parties can assign unless they agreed not to do so in the agreement itself.
According to a Kansas appellate court, valid covenants not to compete are generally assignable. See Safelite Glass Corp. v. Fuller, 15 Kan. App. 2d 351, 807 P.2d 677, rev. denied 249 Kan. 776 (1991), quoted in A.O. Smith Corp. v. Kan. Dep't of Human Res., 36 Kan. App. 2d 530, 538 (Kan. Ct. App. 2005).
posted by Neil Klingshirn | Jan 7, 2010 11:45 AM [EST]
1) it obtained the company from the old owner in a stock purchase or
2) it purchased the assets of the old owner and obtained a valid assignment of the old owner's rights under your non-competition agreement.
These are both factual questions. If the transaction was an asset purchase with an assignment of the non-competition agreement, a question remains whether Kansas law permits assignments of non-competition agreements. Some states, like Indiana, hold that non-competition agreements are "personal service contracts" and therefore cannot be assigned. Other states treat non-competition agreements like normal contracts, which either parties can assign unless they agreed not to do so in the agreement itself.
According to a Kansas appellate court, valid covenants not to compete are generally assignable. See Safelite Glass Corp. v. Fuller, 15 Kan. App. 2d 351, 807 P.2d 677, rev. denied 249 Kan. 776 (1991), quoted in A.O. Smith Corp. v. Kan. Dep't of Human Res., 36 Kan. App. 2d 530, 538 (Kan. Ct. App. 2005).
posted by Neil Klingshirn | Jan 7, 2010 11:45 AM [EST]
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