united-states employment
Noncompete, nonsolicit, nondisclose agreement company that was sold. But wait, there&#39;s more
<p>This all happens in Minnesota.  </p>

<p>Employee E worked for company A and had standard noncompete agreement. Agreement has an assignment clause assigning rights to any successor. Company B buys most business units of company A and hires most employees. Seller of A starts new company N. E stays with seller of A and works for new company N. Assume it's clear that language of noncompete contract assigned to B all rights of all of A's employees who now work for B. </p>

<p>A was in the business of providing medical billing services to hospitals. E worked in that industry when hired by A. During employment E developed a product to detect fraud within hospitals and stopped working on billing and started working on the product. When B buys A, it only buys the billing business. Seller of A starts new business explicitly to sell fraud product and invites E to come along. There is an implied option for E to stay on and work for B, but B does not express interest in E and has no contact with E before the sale. Seller has an explicit new agreement with B (it is specific to seller the person) that seller will not engage in medical billing business. E has no new agreement.  </p>

<p>Seller commences new business N. E has no new agreement or paperwork with N. Not even a tax form. N is a small company and does not provide health insurance but since E received benefits under his spouse's employer there was no change in status in that regard. The only change is that auto deposit pay checks were now from N.  </p>

<p>Hospital who previously worked with seller at company A contacts seller, asking for consulting work on a billing problem. Because of seller's agreement with B, the consulting contract is written between hospital and B, with N working under a separate agreement with B.  Basically N does all the work while B prints invoices and sends 50% of money to N. </p>

<p>Seller goes to hospital and brings E along for the consulting job. In the course of the work, hospital offers E a job. Not just a job, the job - the one that's being filled by the contract work. Counsel for hospital sees no problem with the offer as it relates to hospital's actions and let's assume that's a correct assessment. But what about E?  </p>

<p>Is there any legal doctrine whereby E's agreement with A continued to apply to E in his work for company N? What about B? Do they have any standing to block E's going to work for a B's customer? My thinking here is that E technically has a noncompete agreement with B but perhaps there is a generally accepted public policy theory whereby employers can't enforce agreements against former employees especially under these facts.  </p>

<p>Reasonable minds may suggest that neither B nor N have an interest in blocking the employment. But let's assume seller is pissed bc now E won't be available to develop product for N and B is pissed because the hiring stops the gravy train and cuts off future potential work.  </p>

<blockquote>
  <p>Is there any legal doctrine whereby E's agreement with A continued to
  apply to E in his work for company N?</p>
</blockquote>

<p>No, because the parties to the non-compete agreement were Employee E and company A, not the human who owned and sold A.</p>

<blockquote>
  <p>What about B? Do they have any standing to block E's going to work for
  a B's customer?</p>
</blockquote>

<p>No. My rationale is that the decisions you describe result in a waiver of the non-compete clause.</p>

<p>An employment relation between B and E never existed. Thus, the only vestige of B's non-compete rights binding E that could have been preserved stem from E's former employment at A. However, that vestige disappeared at the instant B --apropos of the hospital project-- waived its non-compete clause with N.</p>

<p>Given B's waiver with regard to N, N's failure to establish a non-compete clause with E enables the latter to conduct business with (or accept employment at) the hospital. If anything, B would have standing to sue N for negligence or related torts. But neither B nor N has any viable non-compete claims against E.</p>
