In a case that traversed from trial court, to court of appeals, back to the trial court, back to the court of appeals and then to supreme court, Kentucky’s highest court changed the law on noncompetition agreements and the consideration required for an enforceable restrictive covenant. Company sued former employee and his new employer to enforce a noncompete executed by employee after many years of service and without any additional compensation or consideration to the employee. After several hearings the trial court granted injunctive relief and applied the “blue pencil” doctrine to insert a reasonable area limitation on the noncompete ruling that the former employee could not act in violation of the contract. Read the trial court’s ruling and temporary injunction.
Former employee and his new employer then pursued emergency relief at the Court of Appeals under CR 65.07. The Court of Appeals dissolved the injunction on the emergency appeal. Read the CR 65.07 order dissolving the temporary injunction. The supreme court declined review as to the interlocutory rulings. The case was then remanded to the trial court to address the merits of the case without any injunctive relief being in place and the trial court granted Former Employee summary judgment and dismissed the balance of the Company’s case for protection based on the wording of the appellate court’s order.
Company then appealed and on full review the Court of Appeals agreed that the Company’s claims should not have been dismissed but significantly limited its damage claim and created a new “test” for enforceability of noncompetes. See the Opinion of the Court of Appeals
Company moved for discretionary review which was granted by the Supreme Court. The Supreme Court then used the case as a first review by the high court to consider noncompetes and held that 50+ years of law in Kentucky providing that continued employment is adequate consideration to enforce a noncompete is no longer applicable. They held that the noncompete in issue was unenforceable due to lack of consideration while also holding that the “blue pencil” doctrine is not available in Kentucky. See the Opinion of the Kentucky Supreme Court
Noncompete/restrictive covenant/employment/consideration/CR 65 relief/blue pencil doctrine/issues on review/damages/adequate consideration/unenforceable
