Human Resources News & Insights

Are your offer letters ticking time bombs?

Here’s how one company’s offer letter opened up a whole can of worms about non-competes, employee contracts and confidentiality agreements.

Pulse Technologies had an opening for an experienced Swiss Screw engineer, and decided to hire Peter Notaro for the position.

Pulse sent Notaro an offer of employment letter. The letter described the position, responsibilities, location, base salary, benefits, effective date and confidentiality requirements.

More importantly, it also said, “You will also be asked to sign our employment/confidentiality agreement.  We will not be able to employ you if you fail to do so,” and “[i]n addition, the first day of employment you will be required to sign an Employment Agreement with definitive terms and conditions outlining the offer terms and conditions contained herein.”

On his first day, Notaro signed an employment/confidentiality agreement, which included a non-compete.

Non-compete confusion

Several years later, Notaro accepted a position at a competing firm for the same work he had been doing at Pulse.

Not surprisingly, Pulse sued Notaro and the competing company and tried to enforce the non-compete.

The competing company argued that since the offer letter mentioned nothing about non-competes among the info on contracts, benefits and so on, it wasn’t enforceable as part of his employment contract.

The court wasn’t having it.

Why? It was clear, based on the wording of the offer letter, that the letter wasn’t an employment contract — Notaro still had to sign the confidentiality agreement and the employment agreement on his first day.

Final verdict: The non-compete could be enforced, and Notaro couldn’t go work for the competing firm.

William A. Schreiner, Jr., writing on the Suits by Suits blog, had the takeaway for HR and upper management:

The bottom lines from Pulse Technologies v. Notaro are these: 1) as a general matter, employers that want to use non-competes – where they are otherwise allowed by law – should be clear and upfront about them, to avoid the sort of situation that Pulse Technologies found itself in: protracted litigation through three levels of courts; 2) executives who are wary of signing a non-compete, or who want to negotiate over the scope of such an agreement, should bear in mind that even if a non-compete isn’t included in an offer letter, it could be included in a final employment agreement and (at least in Pennsylvania) therefore be enforceable.

The case is Pulse Technologies, Inc. v. Notaro and MK Precision LLC.

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