With so much focus on the reasonableness of restrictive covenants, it’s easy to forget that non-competes are plain old contracts—nothing more. And when it comes to enforcing non-competes, basic contract law still applies.
A Georgia employer recently learned this the hard way. In MAPEI Corp. v. Prosser, a Georgia appellate court held that an agreement that did not include a non-compete covenant actually had replaced a similar earlier agreement that did include one. The reason: the later agreement included a superseding-agreement clause stating that it “totally replaces all prior contractual agreements or understandings between us, whether oral or written, about confidential information or any other subject matter contained herein.” Applying this principal, the Court found the employer’s non-compete obligations were null and void.
In reaching its decision, the Court rejected the employer’s argument that the employee’s later conduct or the parties’ mutual mistake somehow revived or ratified the earlier agreement. “A contract that is intended to be signed by both parties, and so appears on its face, is complete when thus signed,” the Court said. In other words, when the employee signed the second agreement, it became binding by its own terms, and its terms clearly stated that it replaced all prior agreements. It’s a harsh reality, but one that could easily have been avoided with some basic diligence.
The takeaway for employers is clear. Pay attention to what you are asking your employees to sign. Review the employee’s file prior to presenting the employee with documents to ensure that any new documents complement but do not negate or override one another. In particular, any document that addresses issues of confidentiality, IP, or restrictive covenants should be exhaustive, leaving nothing on the table.