WHAT HAPPENS TO YOUR NON-COMPETE CONTRACT WHEN YOUR EMPLOYER IS PURCHASED BY ANOTHER COMPANY?
The scenario is not uncommon. An individual is hired by a company and enters into a non-compete agreement with the company. Things move along smoothly for a couple of years and then the employer/company sells out to another larger company. The new company tells all of the employees from the old company that they cannot leave their employment with the new company and enter into a competitive position with another company. Can they get away with this?
The answer depends upon where the original non-compete contract was signed and which state’s law will apply to the dispute. In Virginia, the general answer is that contracts for personal services (like a non-compete agreement) are not assignable unless both parties agree to the assignment. Virginia courts take the position that the employment agreement was entered into based upon mutual trust and confidence and cannot be transferred to the new employer. In other words, the new employer (under Virginia law) will have a difficult time enforcing the non-compete against the employee of the purchased company.