In this en banc decision, the Delaware Supreme Court answered a certified question from the United States Court of Appeals for the Seventh Circuit concerning whether the employee choice doctrine (under which courts do not review forfeiture-for-competition provisions for reasonableness so long as the employee voluntarily terminated their employment) applies outside of the limited partnership context. The Supreme Court answered this question in the affirmative, finding that forfeiture-for-competition provisions differ from non-competes in that they do not restrict competition or the ability of the former employee to work, regardless of whether benefits were being forfeited or had already been paid out. Practically speaking, this decision means that, unlike for traditional restrictive covenants against competition, an employee of any entity, and not simply of a limited partnership, who voluntarily leaves their employment and competes can be required to forfeit previously granted benefits subject to a forfeiture-for-competition provision without additional judicial scrutiny of the provision’s reasonableness.
