Court Opinion

ID: 4713047
Source: CourtListenerOpinion
Date Created: 2021-08-12 00:38:55.116814+00
Date Added: 2024-06-11T08:07:15.500695
License: Public Domain

Madsen, J.
(concurring) — The majority reaches the correct result but fails to sufficiently articulate the multiple *843legal grounds raised for striking down a facially unreasonable noncompete agreement formed during the course of at-will employment, leaving doubt as to the permissible scope of a valid noncompete agreement. First, the majority’s position on the adequacy of continued employment as consideration is unclear. Continued at-will employment is never independently sufficient to uphold a covenant not to compete, and we should not suggest otherwise. Second, the unreasonable nature of the noncompete agreement in question is overlooked as an independent basis for finding the agreement unenforceable. Therefore, I write separately to clarify that continued at-will employment is never sufficient consideration for a noncompete agreement formed after the outset of employment and to explain that the agreement in question is also unenforceable on the independent ground that it is unreasonable.5
ANALYSIS
Continued at-will employment, without more, is never sufficient consideration for a noncompete agreement formed subsequent to employment. As the majority correctly states, where the only consideration is continued employment, “[t]he general rule in Washington is that consideration exists [only] if the employee enters into a noncompete agreement when he or she is first hired.” Majority at 834. This proposition is well-settled and without exception. See, e.g., Wood v. May, 73 Wn.2d 307, 312, 438 P.2d 587 (1968); Racine v. Bender, 141 Wash. 606, 612, 252 P. 115 (1927); Knight, Vale & Gregory v. McDaniel, 37 Wn. App. 366, 369, 680 P.2d 448 (1984); see also 2 Corbin on Contracts § 6.19, at 338 (1995); 15 Corbin on Contracts § 80.23, at 169 (2003). As such, the majority properly holds that Labriola’s continued employment was insufficient to uphold a noncompete agreement formed long after he was hired. Majority at 838.
*844While correctly establishing that “independent consideration is required at the time promises are made ... [to validate] a noncompete agreement [formed] when employment has already commenced,” the majority then sends a confusing message with regard to the potential adequacy of continued employment and training as independent forms of consideration, by adding that “[w]hile continued employment and/or continued training may serve as sufficient consideration, it certainly was not the case here.” Majority at 838 (emphasis added).
Established case law does not support the majority’s incautious suggestion that continued employment or routine training may serve as independently sufficient consideration in some cases where a noncompete agreement is formed after employment begins. At-will employment is by definition nonbinding, as either party may terminate the relationship at any time.6 As such, continued at-will employment cannot sustain a covenant not to compete without supplemental consideration such as explicitly promised or substantially realized future employment or specialized training, increased wages, or the disclosure of confidential information of value. Wood, Racine, and Knight accordingly recognize that while offers of at-will employment may serve as consideration for noncompete agreements formed at the inception of employment, promises of employment or training are otherwise sufficient only where they are explicit and convey something more than that which was bargained for or inherent in the original terms of employment.
In accord with these principles, an employer’s explicit promise “to teach [an employee] the [new] skill of horseshoeing” was held sufficient to support a noncompete agreement in Wood, 73 Wn.2d at 310, as were explicit promises of “future employment” for specific terms in Racine, 141 Wash. at 609. Relying on our decisions in Wood *845and Racine, the Court of Appeals subsequently reasoned in Knight that “[c]ontinued employment and training [together] are sufficient consideration for an employee’s promise not to compete.” Knight, 37 Wn. App. at 368-69 (emphasis added) (citing Wood, 73 Wn.2d at 310-11; Racine, 141 Wash. 606). While the Court of Appeals’ reliance on our decision in Wood was sound with regard to training, Racine did not, as Knight suggests, address “continued employment,” but rather the analytically distinct category of guaranteed “future employment.”7 Thus, none of the cases from this court that are cited by the majority recognize continued employment as sufficient consideration for non-compete agreements entered into after employment has commenced.
Moreover, in Schneller v. Hayes, 176 Wash. 115, 119-21, 28 P.2d 273 (1934) this court held that a promise of employment which could be terminated at the employer’s pleasure was not adequate consideration for an employee’s promise not to compete, even though the employee received instruction and work-related experience during the routine course of his employment. The agreement in Schneller, like the agreement at issue here, was “wholly lacking in consideration” because it “promised [the employee] nothing in the way of future employment, and [moreover] stipulated nothing as to wages.” Schneller, 176 Wash. at 118-19. In sum, this court has never held that continued employment alone is sufficient consideration to uphold a noncompete agreement, and we should be careful not to suggest otherwise.
While largely overlooked in the majority’s analysis, a covenant not to compete is also unenforceable if unreasonable. Sheppard v. Blackstock Lumber Co., 85 Wn.2d 929, 931, 540 P.2d 1373 (1975); Racine, 141 Wash. at 611; Wood, 73 Wn.2d 307; Knight, 37 Wn. App at 369. Recognizing this fact, the majority acknowledges that only “noncompete *846agreements that are validly formed and are reasonable” will be enforced. Majority at 833 (emphasis added). The majority’s focus on the absence of consideration should therefore not be interpreted to suggest that the agreement at issue here would be made enforceable merely by the addition of consideration in the form of “increased wages, a promotion, a bonus, a fixed term of employment, or perhaps access to protected information.” Majority at 834. A restrictive covenant that is unreasonable is unenforceable even where the requirements of consideration are met.
Whether a noncompete agreement is reasonable is a matter of law to be decided by the courts. Knight, 37 Wn. App. at 368; Marquez v. Univ. of Wash., 32 Wn. App. 302, 648 P.2d 94 (1982); Alexander & Alexander, Inc. v. Wohlman, 19 Wn. App. 670, 578 P.2d 530 (1978). Agreements cannot be more restrictive than is reasonably necessary to protect the legitimate business interests of employers. Racine, 141 Wash. at 612; Wood, 73 Wn.2d at 312; Sheppard, 85 Wn.2d at 931-33; Knight, 37 Wn. App. at 369. The test for reasonableness takes into account “whether or not the restraint is necessary for the protection of the business or good will of the employer,” and “whether it imposes on the employee any greater restraint than is reasonably necessary to secure to the business of the employer, or the good will thereof, such protection.” Racine, 141 Wash. at 611-12; see also Wood, 73 Wn.2d at 309.
In short, employers can take measures to protect legitimate business interests, but may not unreasonably restrict the freedom of current or former employees to earn a living.8 Noncompete agreements are therefore unreasonable whenever they are used to secure employers against *847employees’ lawful use of labor and skills.9 Alexander, 19 Wn. App. at 687; Copier Specialists, Inc. v. Gillen, 76 Wn. App. 771, 774, 887 P.2d 919 (1995). Noncompete agreements designed to stabilize a company’s current workforce through unreasonable restraints are similarly unenforceable.10
The agreement at issue here is unreasonable because it bars Labriola from working in his field of expertise even where he takes no unfair advantage of his former employer. The agreement specifically prohibits Labriola both “during and after termination of [e]mployment” from “perform [ing] any work in competition with the services, sales and products of Employer” or “[b]ecom[ing] employed by any business competing with Employer.” Ex. C, Clerk’s Papers at 131-34. By prohibiting Labriola from gaining lawful posttermination employment in such broad-sweeping terms, the agreement represents an unfair attempt to stabilize Pollard’s workforce and secure its business against legitimate competition. Postemployment restraints of this nature are never reasonable. Ekman v. United Film Serv., Inc., 53 Wn.2d 652, 657, 335 P.2d 813 (1959).11 Because the noncompete agreement at issue is much more restrictive than reasonably necessary to protect legitimate *848business interests, the agreement would be unenforceable even if the requirements of consideration were met.
Reconsideration denied January 21, 2005.

 Appellant argued the issue of reasonableness in Parts VI.A.7 and VI.C of the brief.

 Ford v. Trendwest Resorts, Inc., 146 Wn.2d 146, 152, 43 P.3d 1223 (2002); Thompson v. St. Regis Paper Co., 102 Wn.2d 219, 223, 685 P.2d 1081 (1984); Roberts v. Atl. Richfield Co., 88 Wn.2d 887, 891, 568 P.2d 764 (1977); Webster v. Schauble, 65 Wn.2d 849, 852, 400 P.2d 292 (1965).

 While Knight suggests that three years of continued employment may be sufficient, our decision today does not establish what a reasonable or substantial length of time is, only that continued employment was not sufficient consideration here. Majority at 838.

 The Restatement provides: “In the case of a post-employment restraint, the harm caused to the employee may be excessive if the restraint inhibits his personal freedom by preventing him from earning his livelihood if he quits.” Restatement (Second) of Contracts § 188, at 43 cmt. c (1981). See also 2 E. Allan Farnsworth, Farnsworth on Contracts § 5.3, at 29 (3d ed. 2004).

 The Restatement supports Washington law on this point: An employer cannot “prevent or inhibit” its former employees from using the “normal skills of the[ir] trade.” Restatement (Second) op Contracts § 188 cmt. (b) (1981).

 See Schmersahl, Treloar & Co. v. McHugh, 28 S.W.3d 345, 350 (Mo. Ct. App. 2000) (holding, in part, that a noncompete agreement constituted an unenforceable restrictive covenant in restraint of trade, since it did not seek to protect proprietary information or customer contacts but, rather, the stability of plaintiff’s workforce).

 The Georgia court has observed, for example, that “[t]his court has held on several occasions that a covenant wherein the employee agreed not to accept employment with a competitor ‘in any capacity* imposes a greater limitation upon the employee than is necessary for the protection of the employer and therefore is unenforceable.” Howard Schultz & Assoc. of the SE, Inc. v. Broniec 239 Ga. 181, 184, 236 S.E.2d 265, 268 (1977) (citing Dunn v. Frank Miller Assocs., 237 Ga. 266, 227 S.E.2d 243 (1976); Federated Mut. Ins. Co. v. Whitaker, 232 Ga. 811, 209 S.E.2d 161 (1974); Dixie Bearings, Inc. v. Walker, 219 Ga. 353, 133 S.E.2d 338 (1963)). Corbin says: “[PJublic policy prevents the enforcement of a restraint that is unconnected with a contract that has a purpose other than restraining trade.” 2 Corbin on Contract § 6.19, at 340 (1995).