Avoid FLSA violations and bad-faith noncompetes

Q         Can we require an employee to sign a noncompete agreement before they receive their final paycheck?

There are at least two issues raised by this inquiry. First, you may not withhold earned wages from an employee. This would potentially give rise to a violation of the Fair Labor Standards Act (FLSA) and Mississippi law.

Second, a noncompete agreement is a contract for which sufficient consideration must be provided. It’s unlikely a Mississippi court would find that providing an employee wages they earned for time already worked and are owed by law is sufficient consideration for entering into a noncompete agreement. In addition, while continued employment, even at-will employment, is sufficient consideration for a noncompete agreement in Mississippi, it’s unlikely a Mississippi court would find the prospect of continued employment sufficient consideration if the period of employment after entering into the noncompete agreement was very short.

Further, Mississippi courts have rejected attempts to enforce noncompete agreements when evidence exists of bad faith on the part of the employer. Having an employee enter into a noncompete agreement, while intending to terminate their employment in the near future, might be deemed bad faith.

Martin J. Regimbal is a shareholder with The Kullman Firm in Columbus. You can reach him at mregimbal@kullmanlaw.com.