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Covenant Not to Compete Cannot Be Assigned to New Employer Without Employee Permission
Description Appeals court upheld dismissal of a suit against former employees who went into competition with their former employer. The covenants not to compete no longer bound the employees because they signed the personal service contract with a company prior to its merger with a new firm. Such contracts can be assigned only with consent of all parties.
Topic Employment Law
Key Words Covenant Not to Compete; Assignment
C A S E   S U M M A R Y
Facts Kagy and others worked for USAG. The workers signed an employment contract that contained a covenant prohibiting employees from working in the auto glass or auto trim business for one year after leaving USAG. USAG later merged with another firm. That firm merged with Safelite. Kagy and others quit Safelite and formed an auto glass company that competed with Safelite. Safelite sued the former employees for breach of the covenant. The trial court dismissed the suit; Safelite appealed.
Decision Affirmed. "Some contract rights are so personal to the assignor that they are not assignable. Such contracts are referred to as personal service contracts." These can be assigned only with the consent of both parties. Here the employment contracts were personal service contracts. Because of that, the contracts, and therefore the covenant, could not be assigned to Safelite without the consent of the employees, which was not requested or given. The fact that the employees kept working for Safelite does not mean they acquiesced to the assignment of the employment contract.
Citation Safelite Glass Corp. v. Kagy, 2000 WL 703793 (Ct. App., Ohio, 2000)

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