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Recently, the Connecticut Appellate Court settled a decades-long split among trial courts, by holding that continued at-will employment may qualify as sufficient consideration in exchange for a restrictive covenant, such as a covenant not to compete.

The underlying facts in Schimenti Construction Company, LLC v. Schimenti, __ Conn. App. __, __ A.3d __, 2023 WL 175471 (Conn. App. Ct. Jan. 17, 2023) are as follows. The plaintiff is a construction management firm solely owned by Matthew Schimenti (“Schimenti”).  The defendant, Joseph Schimenti, is Schimenti’s cousin, and began working for the plaintiff in 1998. In early 2014, the defendant was promoted to managing director. In connection with that promotion, on February 25, 2014, Schimenti presented the defendant with two documents – a promotion letter and a non-disclosure agreement. The promotion letter outlined the position’s responsibilities and compensation, specifying that it did not create a contract for employment. Rather, the letter stated that the defendant “shall at all times be an employee at will of the [plaintiff].” The promotion letter further stated that “as condition of [the defendant’s] continued employment” the defendant was required to execute an attached non-disclosure agreement (the “NDA”). 

The defendant’s status as an “employee-at-will” was reiterated in the NDA, in which the defendant agreed that in “consideration and as a condition of [his] employment by [the plaintiff]” he was prohibited from competing with the plaintiff’s business during his employment by the plaintiff and for two years thereafter. The defendant executed the agreements in February and March, 2014. Four years later, the defendant resigned and joined a competing construction firm. The plaintiff subsequently brought suit against the defendant alleging he was violating the non-competition provision of the NDA.

In his motion for summary judgment, the defendant argued that the NDA was unenforceable because there was “no consideration … beyond [the defendant’s] continued employment.” The trial court agreed and, citing Thoma v. Oxford Performance Materials, Inc., 153 Conn. App. 50, 100 A.3d 917 (2014), concluded that “a party giving nothing more than the status quo of continuing employment—neither offering a benefit nor accepting a harm—offers no consideration to exchange for his promise and the promise is, therefore, unenforceable.”

On appeal, the Connecticut Appellate Court reversed the trial court’s ruling, relying on Roessler v. Burwell, 119 Conn. 289, 176 A. 126 (1934) and its “holding that consideration in the form of continued employment for at-will employees can be sufficient to make enforceable a restrictive covenant agreed to by the parties at some point after the commencement of employment,” which “remains binding precedent.” Specifically, the Appellate Court found that Roessler was applicable to the facts before it because both cases involved at-will employees whose “employment could be terminated at the plaintiff’s discretion, and, therefore, the defendant’s continued employment could constitute consideration for the [NDA].” 

The Appellate Court distinguished the present case from Thoma, in which the defendant had already been promised a term of employment when the plaintiff sought to use continued at-will employment as consideration for the defendant’s execution of a second agreement containing a restrictive covenant. It concluded that “[a]t trial, as the plaintiff did in Thoma, the defendant may present evidence that there was no connection between the nondisclosure agreement and his continued employment; but, if connected, continued employment can be sufficient consideration for a restrictive covenant.” In so holding, the Appellate Court appears to have resolved the split among lower court cases as to whether continued at-will employment may be sufficient consideration for a non-competition agreement or other restrictive covenant. Employers using restrictive covenants must, therefore, be careful to condition any at-will employee’s continued employment upon his or her written agreement to those restrictions. Even then, providing additional consideration beyond continued at-will employment will often be the safer approach.