Skip to main content

Continued Employment is Not Sufficient Consideration to Enforce a Non-Compete Agreement Signed After Employment Has Started (Hawaii)


The Standard Register Co. v. Keala - US District Court for the District of Hawaii


Facts:  Lynden Keala, Jaxcine Kaulili-Guzon, and Sharon Brown-Henry all worked for The Standard Register Co. and WorkflowOne LLC ("WorkflowOne").  Each of the employes signed agreements with WorkflowOne in which they agreed to 1) not disclose the confidential trade secrets of WorkflowOne; and 2) for a period of twelve months after their last date of employment with WorkflowOne, not solicit business competitive to WorkflowOne.  While Keala signed the agreement around the time he started back with WorkflowOne, both Kaulili-Guzon and Brown-Henry signed the agreements after they had been working at WorkflowOne for a period of time.

After the former employees left their positions at WorkflowOne, suit was subsequently filed against the former employees as well as their current employer.  WorkflowOne based its claims on the grounds that the former employees violated the employment agreement with WorkflowOne when the former employees went to work for the new company and solicited clients and disclosed trade secrets from their former employer.

WorkflowOne filed a Motion for Temporary Restraining Order and requested that the court enter an order that would prohibit Defendants from 1) breaching the non-solicitation and non-disclosure provisions of the former employees' agreements with WorkflowOne; 2) misappropriating, disclosing, or otherwise using WorkflowOne's trade secrets; and 3) tortiously interfering with WorkflowOne's valid business relationships and contracts.

Holding:  The District Court denied the requested Temporary Restraining Order and held that as a result of a lack of valid consideration for the agreements the former employees signed, the agreements were not enforceable.  Had the consideration been a promotion or even a raise, that could have been deemed adequate consideration to enforce the non-compete agreements.   The Court relied upon a prior Hawaii Supreme Court case that dealt with a similar issue over what consideration is necessary to enforce a non-compete and held that since Brown-Henry and Kaulili-Guzon did not receive any consideration, beyond continued employment from WorkflowOne, the non-compete was not enforceable. 

Other jurisdictions, including Minnesota, Texas, Montana, and Washington were mentioned by the court as also holding that continued employment was not sufficient consideration to enforce a non-compete agreement entered into after employment had already started.  

Judgment:  The District Court denied WorkflowOne's requested Temporary Restraining Order and held the non-compete agreements were not enforceable as the consideration offered by WorkflowOne, mere continued employment, was not sufficient consideration to enforce the non-compete agreements.

The Takeaway:  Readers of the blog are aware that non-compete agreements are a favorite topic of mine.  This case is a good example of how different jurisdictions view non-competes, particularly in the area of what consideration is needed to enforce the non-competes.  In this instance, Hawaii is one of the jurisdictions that holds continued employment is not sufficient consideration to enforce a non-compete.  Employers and employees should check the law in their jurisdiction before seeking to sign, let alone enforce, a non-compete agreement.

Majority Opinion Judge:  Judge Seabright

Date:  July 11, 2014

Opinion:  http://www.employmentmattersblog.com/files/2014/07/The-Standard-Register-Co.-v-Keala.pdf


Comments

Post a Comment

Popular posts from this blog

NLRB: Discussion Among Employees About Tip Pooling is Protected Concerted Activity

  This Advice Memorandum from the National Labor Relations Board’s Associate General Counsel, Jayme Sophir, addressed whether employees which discussed and complained about tip pooling at work constituted protected concerted activity. In relevant part, an employer in New York operated a chain of steakhouses.  While tip pooling was in place at these steakhouses, some of the employees objected to it on the grounds that it was not transparent and improperly divided tips among the workers.  Employees were told not to complain or talk to each other about the tip pool and were told that doing so would endanger their jobs.  Despite the employer later attempting to provide some clarity as to how the tips were being divided, rancor still existed among some employees.  At one point, the employees were told by a general manager that some employees that had been talking about the tip pool were “cleared out” and the employer would continue to do so. In the Advice Memorandum,...
Post a Comment
Read more

San Diego Rolls Back Vaccine Mandate For City Workers

Last Tuesday, the San Diego City Council voted to do away with the vaccine mandate for city employees. The city’s vaccine mandate that was in place required city workers to get the coronavirus vaccine or risk termination.  Perhaps to this surprise of no one, the city’s policy came under fire with 14 employees being terminated and over 100 other employees resigning.  With the coronavirus subsiding, including in Southern California, the San Diego City Council took action. Now, bear in mind, the repeal of the vaccine mandate does not take place immediately. With that being said, the mandate will be repealed March 8th.  I suppose the question now is, what other cities or regions follow San Diego’s lead? For additional information:   https://www.sandiegouniontribune.com/news/politics/story/2023-01-24/san-diego-repeals-controversial-covid-19-vaccine-mandate-citing-drop-in-cases-hospitalizations
Post a Comment
Read more

NLRB: Former Employee Cannot Be Barred From Work Premises After Filing Wage Suit

MEI-GSR Holdings, LLC - NLRB Facts :  MEI-GSR Holdings, LLC d/b/a Grand Sierra Resort & Casino ("GSR") operated a facility that included a hotel, casino, restaurant, clubs, bars, and a pool which were all open to the general public.  Tiffany Sargent ("Sargent") was briefly employed by GSR as a "beverage supervisor" in December of 2012.  After her employment ended, Sargent continued to socialize at one of the clubs.  GSR had a long standing practice of allowing former employees to patronize its facility and did not prohibit Sargent from doing so.  In June of 2013, Sargent and another employee filed a class and collective action against GSR for alleged unpaid wages, in violation of the Fair Labor Standards Act and Nevada law.  In July of 2014, GSR denied Sargent access to an event at one of the clubs.  GSR followed up with a letter and stated that with the on-going litigation (from the wage suit), it decided to bar Sargent from the premises. ...
1 comment
Read more