Lucht’s Concrete Pumping, Inc. v. Horner, 255 P.3d 1058 (2011).
Facts:
Lucht’s Concrete Pumping Inc.-plaintiff appellant vs. Tracy Horner-defendant appellee.
Lucht’s hired Horner as an at-will employee.
After hiring him, Lucht’s asked Horner to sign a non-compete agreement as a condition of
employment.
Horner signed the agreement.
Later, Horner left Lucht’s and began working for a competitor.
Lucht’s sued for breach of contract.
The trial and appellate courts held that there was no consideration for the non-compete
agreement and ruled in favor of Horner.
Lucht’s appealed.
Issues:
Whether continuation of at-will employment is adequate consideration in the context of an
employee’s signing of a non-compete agreement.
Whether the timing of the signing of a non-compete agreement matters when determining if
there was adequate consideration for that agreement.
Rationale:
The trial and appellate courts held that because the non-compete agreement was a condition of
at-will employment, and since the company still had the right to fire Horner and he had the right
to quit without cause, that there was no consideration for the agreement.
The supreme court disagreed.
In Continental Air Lines, the supreme court had held that “continuation of at-will employment is
adequate consideration in the context of an employee’s receipt of a benefit.”
In multiple cases, the supreme court had held that “[c]onsideration may take the form of
forbearance by one party to refrain from doing something that it is legally entitled to do.”
The court stated that because an employer can terminate an employee at any time, its
forbearance from doing so is the forbearance of a legal right and, by extension, because an
employee can quit at any time, his forbearance from doing so is the forbearance of a legal right
[note: the court did not mention this, but this forbearance of a legal right is the doctrine laid out
by Hamer v. Sidway, where the nephew gave up his legal right to drink, smoke, gamble, etc. in
return for $5000; this forbearance constituting consideration.]
The court then examined the argument the appeals court had made that by signing the non-
compete agreement and continuing to work, Horner had not exercised any legal right. The
supreme court disagreed, stating that because Horner had the right to sign the agreement and
continue working, or not sign the agreement and stop working, his signing of the agreement was
giving up his legal right to work, i.e. to quit or terminate employment.not
Therefore, the court found that because Horner had forborne from exercising his legal right to
terminate employment, there was consideration on both sides.
The court did note that if the company had fired Horner shortly after he signed the non-compete
agreement, that there might have been a lack of consideration in that case.
Disposition: The court reversed the decision of the appellate court and remanded the case “for
consideration of whether the noncompetition agreement was reasonable.”
Holdings:
Continuation of at-will employment is adequate consideration in the context of an employee’s
signing of a non-compete agreement.
There is consideration for a non-compete agreement after at-will employment has begun, just
as there is consideration for these agreements at the start of at-will employment.
Rule: Continuation of at-will employment is adequate consideration in the context of an employee’s
signing of a non-compete agreement, provided that the employee is not fired and does not quit shortly
after signing.
