Cases—Consideration—Employee noncompete clause in at-will employment is void

An employee was not bound by a “Confidentiality Agreement”—in reality a noncompete clause—that he signed upon starting work with his employer because the promise was not supported by consideration, according to a New York federal district court, applying Texas law.

The employer had the employee sales rep sign the agreement on the date of hiring, as a condition of that hiring. The employment was specifically at will, however. When the employee sought to leave, the employer sued.

Judge Loretta A. Preska held that since an at-will relationship is not a contract, any promise by the employer was illusory, and thus the noncompete was not supported by consideration. The employer argued that consideration was provided by the fact that it promised to give the employee confidential information, but the court, relying on a recent Texas case, Trilogy Software, Inc. v. Callidus Software, Inc., 143 S.W.3d 452 (Tex. App. 2004), held that since the promise to give information was conditional on continued employment, and since there was no obligation to continue employment, that promise, too, was illusory.  Transperfect Translations International v. Merrill Corp., 2004 U.S. Dist. LEXIS 24014 (S.D.N.Y. Nov. 29, 2004)