What is the validity of a non-compete agreement if your company closes?

UPDATED: Sep 30, 2022

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What is the validity of a non-compete agreement if your company closes?

I work for a consumer friendly finance company, that is part of a larger umbrella company that doesn’t have any other consumer friendly product providing company’s. We signed a non-compete agreement upon hire but now our company is closing its doors. Is it still valid, the non-compete, or due to the circumstances?

Asked on August 10, 2016 under Employment Labor Law, Georgia


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

1) If you involuntarily lose you jobs, such as due to your company closing, the non-compete is no longer enforceable against you unless you received something of value other than employment in exchange for signing it--e.g. a bonus of some kind. If employment was the only "consideration" for the agreement, then when you lose the job, there is no more consideration to make the agreement binding.
2) If the agreement was with the unit being closed (i.e. with that LLC or corporation), then unless the agreement was specifically assigned to a still-existing company (like the umbrella organization), then even if the agreement would still have been enforceable (e.g. there had been consideration for it; see above), it is no longer enforceable because the part which could enforce it no longer exists.
So it appears very unlikely that the agreement could be enforced after closing and your job loss.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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