Non-Compete Clauses: A Critical Update for Employers
The Connecticut Appellate confirmed today that continued employment alone will not bind an existing employee to an adverse change in contract terms.
In Thoma v. Oxford Performance Materials, Inc., Conn. App. Ct., No. AC 35313, official release 9/23/14, the Court found that a terminated executive was entitled to benefits of her original employment agreement, despite having the executive having signed a second employment agreement negating said benefits.
Specifically, the Oxford executive signed a first employment agreement with provisions including severance pay in the case of termination without cause and received at increase in salary. Some time after, Oxford decided that the benefits in the first agreement were too generous and revised the agreement. Both parties signed the second agreement, which excluded any severance benefits and did not provide any further increase in salary. As provided in the first agreement, the executive’s salary increased. When Oxford terminated the executive over a year later and failed to pay her severance, she sued Oxford.
Ultimately, the Court’s decision should not come as a huge surprise to Connecticut employers. For some time, Connecticut courts have leaned toward requiring some form of additional consideration to bind existing employees to any adverse change in their terms or conditions of employment. Employers should know that if they want to incorporate a non-compete agreement or a mandatory arbitration clause, these significant restrictions on employees must be done in connection with hiring or some incentive other than continued employment to be binding and enforceable.