Delaware court revives Payscale’s non-compete tied to $0 equity

Norman spent years at Payscale, a compensation data and software company. She oversaw sales across the western United States and regularly collaborated with the Chief Revenue Officer and other senior leaders on company-wide strategy. She had access to confidential customer-pricing models, financial reports, and was involved in operations that stretched well beyond her region. 

In exchange for agreeing to restrictive covenants — a nationwide, eighteen-month non-compete, a non-solicitation clause, and a confidentiality provision — Norman received 175,000 Profit Interest Units through two incentive equity agreements with Payscale’s holding company. 

She resigned voluntarily in December 2023. About ten months later, Payscale discovered she had joined BetterComp, a direct competitor. What came next caught the company’s attention: at least five Enterprise customers left Payscale for BetterComp shortly after Norman’s arrival. Payscale also noted that roughly one-third of BetterComp’s workforce at the time consisted of former Payscale employees. 

The lower court had found the non-compete too broad to enforce, called the equity consideration “vanishingly small,” and dismissed the non-solicitation and confidentiality allegations as lacking substance. The Supreme Court saw it differently. 

On the question of geographic scope, the court pointed to Payscale’s nationwide operations, Norman’s cross-regional responsibilities, and the fact that Enterprise contracts typically run three years — making the eighteen-month restriction half that length. On consideration, the court drew an important line: for purposes of forming a valid contract, what matters is that something was exchanged at the time of signing — not whether it had significant cash value at that moment. The Profit Interest Units, worth $0 at issuance but potentially valuable upon a future sale, cleared that bar.