Is a non compete agreement still valid after a company acquisition?
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Is a non compete agreement still valid after a company acquisition?
I am employed by a company which I have a
non compete agreement with. The company
plans to sell soon. After acquisition am I still
bound by that agreement or can I quit and start
my own business doing similar business?
Asked on January 15, 2018 under Employment Labor Law, Massachusetts
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 6 years ago | Contributor
It depends on the following:
1) Is the company an LLC or corporation and, if so, is the LLC or corporation (i.e. the business structure or entity itself) being purchased? If so, then since the employer is remaining as is (only who owns the employer changes) and you signed a noncompete with (we presume) the LLC or corporation, you are still bound by it.
2) If the employer was an LLC or corporation but the entity/structure is not being purchased, only the assets, or the employer was a sole proprietorship, then the agreemen will still bind you only IF the buyer specifically takes over (takes "assignment" of) the contract. In these cases, your agreement is not with the new business, which is why it is not automatically in place or effect; however, a contract like this can be transferred (e.g. sold, as part of the overall sale) by the employer, so *if* the buyer takes it over, it would still be enforceable There must be a specific assignment or assumption of the agreement for this to occur.
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