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Health Club Employee Non-Compete Agreements

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Paul R. Bedard, EsquirePaul R. Bedard, Esquire

It's no secret that most health clubs initially lose money. It typically takes months, and in some cases, years to painstakingly build a large enough membership base to turn a profit. As this membership base and the club's resulting goodwill are established, club owners and operators naturally pay close attention to member retention.

While it is usually easier to retain an existing member than it is to find a new one, this is often not the case when a valued employee leaves to work for, or becomes, your competitor. In my experience, issues involving departing employees and the resulting level of member retention can be particularly problematic when it comes to personal trainers and "their" clients. One focus that will help protect your club's hard-fought goodwill is to ensure that your former employees are precluded from capitalizing on it. Non-compete agreements are a valuable tool in this regard.

This article will provide an overview of non-compete agreements, also known as covenants not to compete, to help club owners and operators have a basic understanding of how these agreements relate to their clubs. It will explain who should sign a non-compete, how to manage the drafting and enforcement of these agreements and the factors a court will likely consider when determining an agreement's enforceability. However, this article is not intended as legal advice. Widely varying state and local laws and factors unique to every situation prohibit one-size-fits-all recommendations. Please consider these comments as a guide to help you when you consult your own attorney for specific direction.

Requirement of Consideration

Like all contracts in the United States, non-compete agreements require consideration. Consideration is a legal term meaning something of value given by the parties to a contract. Each party of a contract must receive some benefit. An offer of employment is considered sufficient consideration in exchange for the soon-to-be employee's promise to perform. However, for existing employees, many courts require that additional consideration, such as a bonus, raise or promotion is present. The employer's promise of continued employment is insufficient consideration in these jurisdictions. In others, the promise of continued employment for an existing "at-will" employee will suffice.

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