The Tenth Circuit just drew a bright line: forfeiture-for-competition clauses aren't bound by typical non-compete scrutiny. Clear drafting is key—employers, take note. Analysis by Proskauer's Seth Safra and Jake Lee. #EmploymentLaw #NonCompete #LegalStrategy
In an important ruling, the Tenth Circuit affirmed that forfeiture-for-competition clauses can be enforced without the typical reasonableness scrutiny required for traditional non-competes. Proskauer attorneys Seth Safra and Jake Lee emphasize this critical distinction, highlighting that employers can strategically leverage forfeiture clauses if clearly drafted.
In Lawson v. Spirit AeroSystems, Inc., Spirit successfully withheld future stock awards from its former CEO, who violated a non-compete clause by consulting for a hedge fund targeting a Spirit supplier. Crucially, the Tenth Circuit found that Kansas law exempts forfeiture-for-competition clauses from the usual reasonableness scrutiny that traditional non-competes require. The decision hinged on the idea that forfeiture clauses do not restrict employment opportunities outright but rather condition future financial benefits on compliance.
The court emphasized the importance of clear and distinct contract language, which allowed Spirit to enforce the forfeiture without triggering a more rigorous legal review. The case underlines for employers the strategic advantage of using well-drafted forfeiture provisions to incentivize compliance without running afoul of restrictive covenant limitations.
Published May 29, 2025.
