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Attorneys

Non-Competes May Be Assigned To Successor Employers

September 14 2016

By Meagan D. Bainbridge

It is a situation that arises often. Company A sells its assets to Company B. After the sale, some employees stay with Company B, and others leave. What happens to the agreements the departing employees signed with Company A? Does Company B get to enforce them? In Symphony Diagnostic Services No 1 Inc. d/b/a MobilexUSA v. Greenbaum, the Eighth Circuit Court of Appeals determined that non-competes agreements may be assigned to the successor company where: (1) the agreement expressly permits assignment; and (2) the agreement is not a contract for personal services.

Background:

Kimberly Greenbaum and Josephine Tabanag were mobile x-ray technicians for Ozark Mobile Imaging (“Ozark”). At some point during their employment, both Ms. Greenbaum and Ms. Tabanag signed nearly identical non-compete agreements with Ozark. Stating that “[i]n consideration of his/her employment by Mobile Medical Services Inc., Ozark Mobile Imaging, Clearview Mobile Imaging, LLC and/or its affiliates . . . ,” the agreements held that during his or her term of employment and for two years afterwards, the employee agreed within a specified geographical area not to:

  1. Directly or indirectly engage in the mobile diagnostic business.
  1. In any manner be connected with or employed by a person, company, firm, or corporation engaged in the mobile diagnostic business.
  1. For himself/herself or on behalf of any other person, partnership, or corporation call on any customer or customers of Mobile Medical Services, Ozark Mobile Imaging, Clearview Mobile Imaging, LLC, and/or its affiliates, for the purpose of soliciting their business for others.

Separate confidentiality agreements were also entered into, with both Ms. Greenbaum and Ms. Tabanag acknowledging that they understood that failure to maintain confidentiality of Ozark materials was just cause for dismissal.

In or about December 2012, Mobilex USA (“Mobilex”) bought Ozark as part of an asset purchase. At that time, Ms. Greenbaum was a full-time employee and District Manager, earning $21.50 an hour, while Ms. Tabanag was a full-time employee earning $17.50 an hour. Upon Mobilex’s purchase of Ozark, it offered Ms. Greenbaum a part time position, with a 90-day probationary period, no guaranteed number of hours, and no guaranteed benefits. Ms. Tabanag was similarly offered a part-time position without guaranteed benefits. Both individuals refused Mobilex’s offers of employment.

In January, 2013, Ms. Greenbaum was hired as a mobile x-ray technician at Mobilex’s competitor, Biotech X-ray (“Biotech”). The next month, Ms. Tabanag was hired by Biotech. Mobilex filed a civil complaint against both Ms. Greenbaum and Ms. Tabanag, seeking to enforce the terms of the non-compete agreements they signed, and alleging that both individuals held Mobilex’s confidential trade secrets.

Ms. Greenbaum and Ms. Tabanag moved for summary judgment, arguing that because the individuals had not consented to the assignment of the non-compete agreements entered into with Ozark, they could not be held to the terms of the agreements. The district court agreed, asserting the individuals consent was necessary in order for Ozark to assign the contracts to Mobilex.

To read the rest of this article, or to read more articles similar to this, please click here: http://blog.hrusa.com/blog/non-competes-may-be-assigned-to-successor-employers/