Does Continued Employment Count as Consideration for a Non-Compete in Kentucky?

One of the most confusing areas of employment law in Kentucky revolves around a legal concept called 'consideration.' If you are handed a non-compete agreement on your very first day of work, the rules are fairly straightforward. But what happens if you have been working at a company in Louisville or Frankfort for five years, and suddenly your boss demands you sign a restrictive covenant to keep your job?

Understanding whether continued employment counts as consideration for a non-compete in Kentucky is vital for both business owners drafting these contracts and employees being asked to sign them. Let us break down how Kentucky courts view these agreements and exactly what is required to make them legally binding.

What is Legal Consideration?

In the United States, a contract is basically a legally enforceable promise. However, a promise is only a valid contract if both sides exchange something of value. This exchange of value is known as 'consideration'. You cannot just give up your right to work for a competitor for free; the employer must give you something tangible in return.

New Hires vs. Existing Employees

How Kentucky courts analyze consideration depends entirely on when the employee is actually asked to sign the restrictive covenant.

When New Hires Sign

If you are a new hire, the consideration is very simple. The employer is offering you a brand new job and a salary. In exchange, you agree to the non-compete restrictions. Because the job itself is the thing of value being offered to you, the agreement is generally considered valid and legally enforceable from day one.

When Existing Employees Are Asked to Sign Suddenly

The situation becomes highly complicated when an existing employee is suddenly asked to sign a non-compete. If you already have the job, and the employer says, 'Sign this or you are fired,' are you actually receiving anything new of value? For decades, this was a heavily debated topic in Kentucky courts.

Can Continued Employment Count as Consideration?

Unlike some states that completely void any non-compete signed after employment begins, Kentucky courts have ruled that continued at-will employment CAN be adequate consideration, provided it is handled correctly. However, a massive shift occurred with the landmark decision in Charles T. Creech, Inc. v. Brown, 433 S.W.3d 345 (KY Supreme Court 2014).

In this case, the Kentucky Supreme Court clarified that mere continued employment-meaning nothing about your job changes except you now have a non-compete-is often not enough consideration on its own. To ensure the agreement is legally enforceable under Kentucky law, the continued employment must be coupled with something new. If the employer offers a tangible benefit alongside the continued employment-such as a cash bonus, a promotion, a significant raise, or specialized confidential training-the consideration requirement is fully satisfied. Therefore, employers in cities like Lexington and Bowling Green must strategically offer these new benefits when presenting a non-compete to an existing staff member.

What Happens in a Court Dispute?

If an employer sues a former employee for violating a non-compete that lacked proper consideration, the employee's defense lawyer will file a motion to dismiss the case. These disputes are typically handled in the local Circuit Court, such as the Warren County Circuit Court, Bowling Green or the Kenton County Circuit Court, Covington. The employer initiates the legal action using Form AOC-105, Kentucky, Administrative Office of the Courts, Civil Summons.

How Much Does a Non-Compete Review Cost?

If you are an employee feeling pressured to sign a non-compete, it is highly recommended to have a local Kentucky attorney review the document before you sign.

• Basic Contract Review: A lawyer will usually charge a flat fee of $300 to $600 to read the non-compete and explain if the consideration is legally adequate.
• Contract Negotiation: If you want the lawyer to negotiate better terms or a higher signing bonus with your employer, expect to pay an hourly rate between $250 and $450.
• Court Litigation: Defending yourself in court because the employer claims continued employment was sufficient consideration can cost anywhere from $5,000 to over $15,000 in legal fees.

How Long Does a Dispute Take?

If the dispute goes to court, an initial hearing for a temporary injunction will usually occur within 2 to 4 weeks. If the judge realizes there was absolutely no consideration given to an existing employee, they may throw the case out immediately. However, if the facts are messy and require discovery, the litigation can drag on for a year or more.

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