Lucht's Concrete Pumping, Inc. v. Horner
255 P.3d 1058 (2011)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
An employer's forbearance from terminating an existing at-will employee constitutes adequate consideration to support a noncompetition agreement signed by that employee.
Facts:
- In 2001, Lucht's Concrete Pumping, Inc. ('Lucht's') hired Tracy Horner ('Horner') as its mountain division manager on an at-will basis.
- Horner was hired as a 'key person' responsible for establishing and maintaining Lucht's business relationships in the mountain region.
- On April 15, 2003, after Horner had been employed for approximately two years, Lucht's asked him to sign a noncompetition agreement.
- The agreement prohibited Horner from soliciting Lucht's customers or employees for twelve months following the termination of his employment.
- Horner signed the agreement but was not given any pay increase, promotion, or other new benefits in exchange for his signature.
- On March 12, 2004, Horner resigned from Lucht's.
- Three days later, Horner began working for Everist Materials, LLC ('Everist'), a direct competitor, as its pumping manager, and helped Everist enter the concrete pumping business in the same region.
Procedural Posture:
- Lucht's sued Horner for breach of contract and Everist for intentional interference with contract in a Colorado trial court.
- The trial court granted summary judgment in favor of Horner and Everist, concluding the noncompetition agreement was unenforceable for lack of consideration.
- Lucht's, as the appellant, appealed the summary judgment ruling to the Colorado Court of Appeals.
- The Court of Appeals affirmed the trial court's decision, holding that continued employment is not adequate consideration for a noncompetition agreement signed by an existing employee.
- The Colorado Supreme Court granted certiorari to review the decision of the Court of Appeals.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does an employer's forbearance from exercising its right to terminate an existing at-will employee constitute adequate consideration to support a noncompetition agreement signed after the commencement of employment?
Opinions:
Majority - Justice Eid
Yes. An employer's forbearance from exercising its legal right to terminate an existing at-will employee is adequate consideration for a noncompetition agreement. The court reasoned that consideration is any benefit to the promisor or detriment to the promisee, no matter how slight. Forbearance from exercising a legal right qualifies as consideration. Because an at-will employee can be terminated at any time, the employer's choice not to terminate the employee in exchange for signing the agreement is forbearance of a legal right. This is consistent with precedent, such as Continental Air Lines, Inc. v. Keenan, where an employee's continuation of work (forbearance from the right to quit) was deemed consideration for new employer policies. The court found no meaningful distinction between a noncompete signed at initial hiring and one signed during employment, as an at-will relationship is effectively renewed daily. A contrary holding would create a perverse incentive for employers to fire and immediately rehire employees to secure an enforceable agreement.
Analysis:
This decision aligns Colorado with the majority of jurisdictions on the issue of consideration for noncompetition agreements with existing employees. It clarifies that 'new' or independent consideration, such as a raise or promotion, is not required to make such an agreement enforceable. By treating the continuation of the at-will relationship itself as sufficient consideration, the ruling simplifies contract formation for employers but emphasizes that these agreements are still subject to a reasonableness test. The decision gives employers more security in protecting their business interests but leaves the door open for employees to challenge agreements that are made in bad faith or are overly restrictive in scope, duration, or geographic reach.
Unlock the full brief for Lucht's Concrete Pumping, Inc. v. Horner