This third written assignment is an analysis of a covenant not to compete. In such a restrictive
covenant, an employee agrees not to compete with the employer for a certain period of time after
the employment relationship ends. For this assignment, you will answer specific questions in
relation to the below covenant not to compete included as a condition to an offer of employment.
Background Information
You recently graduated from Loyola and have received a job offer to be a sales representative for
Carson Health Solutions. Carson Health Solutions is an Illinois company that currently operates
and sells its products only in the state of Illinois. As a sales representative for Carson, you will be
responsible for initiating and maintaining relationships with healthcare providers implementing
and transitioning to Carson’s healthcare software.
Your offer of employment from Carson arrived in the form of a written letter, which included a
statement that all new sales representatives are required to sign a covenant not to compete prior to
beginning employment with the company. The following standard-form covenant not to compete
was enclosed with the letter:
Covenant Not to Compete
Restrictive Covenant: In consideration of my employment with Carson Health Solutions (the
“Company”) and the compensation received from the Company, I hereby agree that I will not
during my employment and for three (3) years following my termination directly or indirectly
engage in any competitive business that is similar to that of the Company. I understand that,
among the restrictions on any competitive practices pursuant to this agreement, I will not recruit
or hire any employee of the Company, or otherwise induce any such employee to leave the
employment of the Company; I will not solicit or have any contact with any person, firm, or
corporation that has been a customer of the Company; and I will not share any knowledge of
proprietary information of the Company. I acknowledge that the restrictions imposed by this
agreement are fully understood and will not preclude me from becoming gainfully employed
following a termination of my employment with the Company.
No Employment Agreement: I acknowledge that this agreement does not constitute an
employment agreement. I understand that my employment with the company is “at will,” which
means I have the right to leave employment at any time and for any reason and the Company
reserves the right to terminate me on the same basis, with or without cause and with or without
notice. This agreement shall be binding on me regardless of whether my employment shall
continue for any length of time and whether my employment is terminated for any reason
whatsoever. This is true whether my employment is terminated by the Company or by me.
Interpretation: It is the desire and intent of the parties hereto that the provisions of this
agreement shall be enforced to the fullest extent permissible. If any provision of this agreement
shall be adjudicated to be invalid or unenforceable, such provision shall be deemed deleted. If
any provision contained herein shall be held to be excessively broad as to duration, geographical
scope, activity, or subject, it shall be construed by limiting and reducing it so as to be enforceable.
Governing Law: This agreement shall be governed by and construed in accordance with the
laws of the State of Delaware.
LREB 315 Professor Bjorn Berg
Section 101 Fall 2018
Deliverable and Evaluation Criteria
Please answer each of the seven questions below relating to the above covenant not to compete.
Each response should be approximately one paragraph that completely addresses all of the
questions within each of the seven respective questions.
1. Consideration is one of the basic requirements of a valid contract. What is consideration?
Is this covenant not to compete supported by consideration? Why or why not? Would
there be consideration if you were instead a current employee already working for Carson
Health Solutions at the time when you were asked to sign the covenant not to compete?
Explain.
2. Some employment agreements are adhesion contracts. What is an adhesion contract? Do
you believe that adhesion contracts should generally be enforceable? Why or why not?
Is this covenant not to compete an adhesion contract? Why or why not? Explain.
3. The issue of the enforceability of covenants not to compete is in part a matter of public
policy. From an employer’s perspective, what is a policy argument in favor of enforcing
covenants not to compete? From an employee’s perspective, what is a policy argument
in favor of not enforcing covenants not to compete? Balancing the competing policy
arguments, do you believe that covenants not to compete should generally be
enforceable? Why or why not? Explain.
4. The issue of the enforceability of covenants not to compete is typically a matter of state
common law (so enforceability varies state-by-state based on case-by-case court
decisions). In general, for a covenant not to compete to be enforceable, the restraints
(time restrictions, territory restrictions, scope of activity restrictions) must protect a
legitimate business purpose, must not impose an undue burden on the employee, and
must be otherwise reasonable. Do you believe that the restraints in this covenant not to
compete (“Restrictive Covenant”) should be enforceable? Why or why not? Explain.
5. Some courts, depending on the jurisdiction, will occasionally reform a covenant not to
compete. In other words, if the restraints (time restrictions, territory restrictions, scope of
activity restrictions) are found to be unreasonably broad, the court may convert the terms
into reasonable ones and then enforce the reformed covenant. Do you believe a court
should (1) enforce as written, (2) reform and then enforce as reformed, or (3) not enforce
an unreasonably broad restrictive covenant? Explain.
6. A choice-of-law clause is a clause in a contract designating the law (such as the law of a
particular state) that will govern the contract. This covenant not to compete contains a
choice-of-law clause (“Governing Law”) designating that Delaware state law will govern
the contract. Do you believe that this choice-of-law clause should be enforced? In other
words, do you believe that an Illinois court should apply Delaware state law in
interpreting and determining the enforceability of this covenant not to compete? Explain.
7. Do you believe that employers should require that their employees sign covenants not to
compete as a condition of employment? Why or why not? As an employee, would you
sign the above covenant not to compete under the described circumstances? Why or why
not? Explain.
LREB 315 Professor Bjorn Berg
Section 101 Fall 2018
Additional Information
While completing “new hire” paperwork prior to your first day of work for your new employer,
you are asked to sign the below arbitration and confidentiality agreement. Please read the below
agreement and answer the questions that follow (in approximately one paragraph each).
Mandatory Binding Arbitration and Confidentiality Agreement
You and the Company hereby agree that all employment-related claims that the Company may
have against you or that you may have against the Company must be submitted for resolution by
mandatory, binding arbitration. The Federal Arbitration Act shall govern the interpretation and
enforcement of this agreement. Through this agreement, you are giving up your right to a jury
trial; you instead agree to arbitrate any employment-related dispute.
This arbitration requirement applies to all claims related to or arising from your employment or
termination thereof, including without limitation federal, state and local statutory, constitutional,
contractual and/or common law claims, including but not limited to claims arising under Title VII
of the Civil Rights Act; the Age Discrimination in Employment Act; the Equal Pay Act; the
Pregnancy Discrimination Act; the Americans with Disabilities Act; the Family and Medical
Leave Act; and the Fair Labor Standards Act. The statutory limitations period applicable to a
claim asserted in a civil action shall apply to any such claim asserted in any arbitration
proceeding under this agreement.
You and the Company agree that, except as otherwise required by law or court order or as
necessary to prepare for or conduct the arbitration, the fact and content of any arbitration
proceeding (including but not limited to evidence presented, discovery taken, and documents or
witness statements obtained) shall be held in the strictest confidence and not disclosed to any
person other than the legal counsel or any Company insurer. In the case of any such authorized
disclosure, the recipient shall agree to be bound by this confidentiality obligation. In the case of
any proceeding to confirm or vacate an arbitration award, you and the Company agree to take all
steps necessary to file under seal any material the disclosure of which otherwise would violate the
terms of this paragraph.
Questions
8. Do you believe that mandatory arbitration agreements should be enforceable? Explain.
9. Do you believe that confidentiality agreements should be enforceable? Explain.
10. Assuming that mandatory arbitration and confidentiality agreements are enforceable,
should an employer have its employees sign this type of agreement? Why or why not?
As a new employee, would you sign the above mandatory arbitration and confidentiality
agreement? Why or why not? Explain.
This third written assignment is worth 10 percent of your final course grade. Your grade on this
written assignment will be based on the quality of both the content and the writing of your
responses to the above questions. With respect to the quality of the writing, your responses
should be clear, concise, and precise; should use proper mechanics; and should flow smoothly
