A Business Entity That Changes Its Corporate Structure Risks Expiration Of Its Employees’ Covenants-Not-To-Compete And Confidentiality Agreements

A business entity changing its form, but not its operations, will want to protect non-competition and confidentiality agreements with its employees from expiring as a result of the transaction. Because those covenants usually are viewed as non-assignable personal service contracts, they may be unenforceable by the surviving entity, absent each employee’s express consent, if the covenants are seen as pertaining solely to the disappearing company which executed them. The agreements remain viable only if the rights and obligations they contain, as well as the agreements themselves, are deemed to have passed to the survivor by operation of law.

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