Court Invalidates Non-Compete agreements to Prevent Employment with Company’s Clients

Innovative Financial Services, LLC v. Urban, 2005 Conn. Super. LEXIS 775 marks a milestone in the law of non-compete agreements. Ms. Shelley Anne Urban worked as a full-time employee at Innovative Financial Services, LLC (IFS) from March 24, 2003, to January 17, 2004.  The company provided outsourced bookkeeping, accounting, and administrative services to approximately forty local businesses.  The parties executed a six-page Employment Agreement that stipulated she could not accept employment from a client of the company without the company’s prior written consent.  Ms. Urban had previously signed a “Confidentiality and Non-Competition Agreement” with IFS when she was only a part-time employee.  This prior agreement stated that she was prohibited from providing services to IFS’s past, current, or prospective clients in Hartford County (Connecticut) and Middlesex County (Massachusetts) for a period of one year after termination.  Both of the agreements stated that IFS would be “entitled to injunctive relief in the event of a breach”.

Ms. Urban began to work for the Law Office of William A. Snider two days after her voluntary termination from IFS where she proceeded to perform accounting and bookkeeping services for the business.  The law firm was a prior IFS client and Ms. Urban worked on the firm’s account as an IFS employee in the later part of 2003.  IFS sued Ms. Urban and requested that the Connecticut state court enforce the non-compete agreements and enjoin her from further employment at the Law Office of William A. Snider.  The court denied the company’s request and refused to enforce the agreements between IFS and Ms. Urban.

The court acquiesced that the provisions contained in the agreements were reasonable in scope and did not blatantly favor one party over the other.  The court did not deny the injunction based on unreasonable provisions, but on the basis that Ms. Urban’s actions did not constitute a breach that would disadvantage or harm IFS.  The court stated that injunctive relief is more appropriately applied to prevent a former employee from working for a competing company rather than a former client.  Ms. O’Neil, the owner and president of IFS, did not indicate that Ms. Urban’s actions caused irreparable harm to her company and even testified that she interpreted the non-compete agreements to prevent former employees from “starting up a business to compete against me”.  The court had no choice but to deny the request for injunctive relief in the absence of evidence demonstrating that Ms. Urban’s past or future actions would harm IFS’s business interests.

The lawyers at Maya Murphy, P.C., are experienced and knowledgeable employment and corporate law practitioners and assist clients in New York, Bridgeport, Darien, Fairfield, Greenwich, New Canaan, Norwalk, Stamford, Westport, and elsewhere in Fairfield County.  If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.