Posts tagged with "clause"

Policy of Enforcing Connecticut Non-Compete Agreements to Protect Employer’s Interests

Torrington Creamery, Inc. v. Davenport, 126 Conn. 515 pertains to a dispute regarding a non-compete agreement between an employer and employee in the dairy products industry in 1940.  While this case is by no means recent, it is a seminal case that lays the groundwork for the policy of enforcing non-compete agreements in Connecticut on the grounds of protecting the employer’s interest.  Specifically, this is one of the first Connecticut cases to address the enforceability of a company’s non-compete agreements when another company acquires it.

Case Background

The High Brook Corporation employed Mr. Preston Davenport as a farm manager and superintendent beginning in 1932 at its Torrington, Connecticut location.  The company produced and distributed dairy products in the towns of Torrington, Litchfield, Winsted, Thomaston, New Milford, New Preston, and Greenwich, all towns in western or southwestern Connecticut.  High Brook changed its name to The Sunny Valley Corporation in March 1938 and on April 15, 1938, had Mr. Davenport sign an employment contract.

The contract specified that Mr. Davenport would receive a fixed compensation with no set duration and that he would be subject to several restrictive covenants.  A non-solicitation clause prohibited Mr. Davenport from soliciting, either directly or indirectly, Sunny Valley or its successor’s customers for a period of two years.  Meanwhile, a non-compete clause prohibited Mr. Davenport from engaging in the dairy production and distribution industry in the towns where Sunny Valley operated.

Another clause in the employment agreement stipulated that a court’s invalidation of a portion of the agreement would not affect the legally binding nature of the other provisions.  Sunny Valley sold its operations and assets to Torrington Creamery, Inc. in October 1938 and the company discharged Mr. Davenport from employment on October 18, 1938.  He proceeded to start his own dairy production and distribution business in February 1939 in the towns of Torrington and Litchfield.

The Court’s Decision 

Torrington Creamery sued Mr. Davenport to enforce the duration and geographical limitations of the restrictive covenant he had signed with Sunny Valley Corporation.  The Superior Court in Litchfield County found in favor of Torrington Creamery, Mr. Davenport appealed the decision, and the case went on to the Connecticut Supreme Court where it affirmed the lower court’s decision.

The Supreme Court found the terms of the non-compete agreement to be reasonable and necessary for the protection of Torrington Creamery’s business interests.  The notion of “protecting an employer’s business interests” is a driving force and major policy concern when deciding whether to enforce a non-compete agreement under Connecticut law.  Restrictive covenants become valuable assets of the employer and courts generally hold that the employer is entitled to the right to safeguard these assets.

Equally as important, the court held that the employer benefits contained in a restrictive covenant can be assigned to a purchaser in the event of the sale of the business and its assets.  Thus, when a company acquires another company, it gains the legal authority to enforce the acquired company’s valid non-compete agreements.  Courts view restrictive covenants as valuable business assets that provide for the necessary protection of the employer and any successor company.

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 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.

Covenants Not To Compete in Franchise Agreements

Pirtek USA, LLC v. Zaetz, 408 F.Supp.2d 81

Pirtek USA, LLC was a franchise company that operated as a business system “consisting of the sale, assembly and installation of industrial and hydraulic hoses, fixed tube assemblies and related components and services”. Pirtek entered into a Franchise Agreement with Mr. Irwin Zaetz in September 1999 to license him to operate a Pirtek business.  The agreement contained a non-compete clause that prohibited Mr. Zaetz from operating or working for a competing business within a limited geographical area for a two-year period after the termination of the franchise agreement.

Pirtek and Mr. Zaetz terminated their franchise agreement on April 22, 2005 and the parties went their separate ways.  Pirtek was able to sell that particular franchise to another party, Ms. Ashely Geddes, while Mr. Zaetz and his son proceeded to operate their own business, Hose Medic.  This new company provided many of the same services as Pirtek franchises and covered the same general geographical area.  Additionally, the registered address for Hose Medic was the same one Mr. Zaetz used to register his franchise with Pirtek.

Pirtek’s Allegations

Pirtek alleged that Mr. Zaetz used his son’s company as a front to avoid the enforcement of the covenant not to compete.  More specifically, the company alleged that Mr. Zaetz used Pirtek’s proprietary information to help his son base the new company on the Pirtek business model.  Pirtek sued Mr. Zaetz in federal court and requested that the court issue a temporary injunction to prevent further contractual violations while the court tried the case.  The court denied its request and refused to issue a temporary injunction.

Pirtek sued on three accounts, claiming that Mr. Zaetz breached the non-compete by 1) operating a competing hose installation and repair business, 2) infringing on its intellectual property rights, and 3) violating several post-termination provisions of the franchise agreement.  The court found that Pirtek did not meet the burden of proof necessary to show that Mr. Zaetz was in breach of the non-compete.  Pirtek asserted that their business interests were threatened by Mr. Zaetz’s use of the words “hose”, “assembly”, and a graphic of a cog when advertising and discussing the new company.

The Court’s Decision

This, according to this court, was an unfounded assertion because the words were too general to create confusion among consumers and negatively affect Pirtek’s business operations.  Pirtek was not able to establish that it had suffered any hardship or was likely to do so in the future if an injunction was not issued.  Imminent harm, according to the courts, is a requisite factor for granting a temporary injunction, and a court is not obligated to grant one if this crucial factor is missing.

The court pointed out however that the denial of the temporary injunction did not necessary mean that Pirtek would not be able to obtain a permanent injunction later.  It counseled Pirtek that later stages of litigation could result in the enforcement of the covenant.  It noted that Pirtek had some strong evidence to present and use in subsequent stages of the case but that its current request must be denied because it “failed to demonstrate irreparable harm”.


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.

Enforcing a Non-Compete Agreement to Protect Software Company’s Confidential Information

Weseley Software Development Corporation v. Burdette, 977 F. Supp. 137

Mr. Wesley Burdette worked for Weseley Development Corporation first as a Logistics Analyst and then as a Senior Logistics Analyst from May 1993 to September 16, 1996.  Weseley was a software development company based in Shelton, Connecticut whose focus product was a transportation and logistics management program referred to as TRACS (Tactical Routing and Consolidation System).  Mr. Burdette played a significant role in the development and testing of TRACS versions 3.0 and 3.1.  He worked with “customers and potential customers to evaluate, develop, tailor, and implement Weseley’s products” during his approximately three years of employment.

He gave Weseley his two weeks notice on August 29, 1996 and planned to switch companies to work for Manugistics for the marketing and sales of its product titled MTP.  Management reminded Mr. Burdette of the non-compete clause in his employment agreement that he had signed.

The most important covenants that he signed in conjunction with his employment contract were those not to compete or disclose confidential information.  The agreement was signed on January 14, 1995 after Mr. Burdette was allowed time to consult with an attorney regarding any and all of the agreement’s provisions.  The non-compete clause stipulated that he could not work for a competitor for a period of six months following his termination with Weseley or disclose confidential information for an indefinite period of time.

The company sued Mr. Burdette to enforce the non-compete and asked the court to enjoin him from further employment with Manugistics.  Mr. Burdette countered that the agreement was unenforceable because its provisions were unreasonable and that Weseley had only signed the agreement once litigation began.

The Court’s Decision

The court found in favor of Weseley and enforced the non-compete covenant, enjoining Mr. Burdette from working for Manugistics for a period of six months as stated in the language of the agreement.  It validated the agreement because there was adequate consideration in the form of “continued employment, an articulated paid vacation entitlement, a new entitlement to severance benefits, and stock options”.  Furthermore, it found the limitations to be reasonable such that they fairly balanced Weseley’s desire to protect its business and Mr. Burdette’s desire to still be able to pursue his career.

It was paramount that the court protected the company’s interests since Mr. Burdette had a great deal of access to proprietary research & development information that could have severely disadvantaged Weseley should Mr. Burdette have shared the information with Manugistics.  Although the court stated that there was no evidence that he had already disclosed confidential information, it held that he would inadvertently draw upon his knowledge gained while employed at Weseley and eventually disclose some amount, however small it may be in, in the course of his new employment with Manugistics.


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.

Test for Granting a Temporary Injunction for Breach of Connecticut Non-Compete

Group Concepts, Inc. v. Barberino, 2004 Conn. Super. LEXIS 1036
Case Background

Group Concepts, Inc. is a Connecticut corporation that is in the business of condominium association management and has its office in Hamden.  The company entered into a stock purchase agreement on September 11, 2002, to purchase Barberino Real Estate, Inc., a company that managed condominiums and other properties.  Group Concepts had Ms. Tina Barberino sign a non-compete agreement as part of the acquisition transaction.  In exchange for $84,500, Ms. Barberino agreed not to compete with Group Concepts “within the state of Connecticut until September 2004 and from soliciting any of the clients listed on schedule B of the stock purchase agreement for a period of three years”.

Ms. Barberino began to work at Ennis Property Management, Inc. on October 5, 2003 and competed directly with Group Concepts within the state of Connecticut.  She contacted clients enumerated on schedule B of the stock purchase agreement and Group Concepts lost several accounts because of Ms. Barberino’s actions.

Group Concepts sued Ms. Barberino in Connecticut state court for breach of the non-compete agreement and requested an injunction to prevent further violations of the restrictive covenant.  The court granted Group Concepts’ request for an injunction and ordered the enforcement of the non-compete clause through September 30, 2004 and the non-solicitation clause through September 11, 2005, the respective dates as stated in the restrictive covenant.

The Court’s Decision

In order for a court to grant a temporary injunction, the moving party must submit evidence that demonstrates: 1) it does not have an adequate legal remedy, 2) it would suffer irreparable injury absent the injunction, 3) it would likely prevail on the merits of the case, and 4) the injunction would balance the equities of the parties involved in the dispute.  The court said it need not apply the entire test in this case and only analyzed the third and fourth components to hold that the agreement was enforceable and an injunction was warranted.

The court concluded that a preponderance of the evidence submitted by the parties indicated that Group Concepts would most likely prevail on the merits of its suit.  The provisions of the non-compete agreement were reasonable and the facts of the case clearly pointed to a cognizant breach of the non-compete agreement.  The court concluded that the overall fact pattern of the case demonstrated that Group Concepts would likely prevail on the merits and held that the company met this requirement for the granting of the injunction request.

The court also held that an injunction would balance the equities of the parties.  The court felt that an injunction and enforcement of the non-compete was necessary to protect Group Concepts from experiencing a significant business hardship in connection to Ms. Barberino’s breach of the covenant.  Group Concepts paid substantial consideration ($84,500) for its acquisition of Ms. Barberino’s company and relied on it to prevent Ms. Barberino from breaching the non-compete and non-solicitation provisions.  An injunction would prevent Group Concepts from experiencing adverse business trends because of Ms. Barberino’s undeniably unlawful breach of the non-compete agreement.

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.

Requisite Proof to Demonstrate Irreparable Harm in Connection to Breach of Non-Compete

VBrick Systems, Inc. v. Stephens, 2009 U.S. Dist. LEXIS 45835
Case Background

VBrick Systems, Inc. was a Delaware corporation with primary business operations based in Wallingford, Connecticut that provided networked streaming video products and services.  The company employed Mr. Robert Stephens as its Army Federal Territory Manager from July 2005 until April 1, 2008, when he tendered his resignation from the company and began to work at Optibase, Inc as its Director of Federal Sales.  Optibase is a direct competitor that also sells networked video products and services to government, military, and private sector customers. Mr. Stephens traveled to Connecticut after he was hired by VBrick to attend a training session at the company’s headquarters and signed an employment agreement that contained non-compete and non-disclosure clauses.

The Employment Agreement

In the agreement, he agreed to refrain from working at a competing company during an eighteen-month period after his termination from VBrick.  The non-disclosure covenant stipulated that Mr. Stephens be legally obligated to maintain the confidential nature of VBrick’s business operations and information that he had access to during his employment with the company.  The employment agreement stated that Connecticut law would govern any legal disputes but failed to enumerate any geographical limitations for the restrictive covenants.

VBrick alleged that Mr. Stephens breached the covenants by accepting a position with a competitor within eighteen months of his termination and by using VBrick’s proprietary information in his role as an Optibase employee.  VBrick sued in federal court and requested that the court enforce the provisions contained in the restrictive covenants.  The court ultimately found in favor of Mr. Stephens and denied VBrick’s request for injunctive relief.  The court found that VBrick did not meet the burden of proof to demonstrate that it would suffer irreparable harm if the court did not issue an injunction.

The Court’s Decision

The court held that VBrick failed to present adequate and convincing evidence that Mr. Stephens actually possessed or had access to any of its trade secrets or confidential information.  He had familiarized himself with the products he was marketing and selling by using the company’s training programs and corporate website, both of which are accessible by the public.

Additionally, VBrick did not convince the court that Mr. Stephens’ action as an Optibase employee had “affected or will significantly affect VBrick’s sales or revenues”.  This meant that VBrick was unable to show that it had been adversely affected by Mr. Stephens’ actions or that it was likely to be in the future.  VBrick’s testimony offered evidence to the contrary when it stated before the court that its sales and revenues remained strong despite Mr. Stephens’ termination and the national economic downturn.  In light of inadequate evidence to show that Mr. Stephens’ action at Optibase created an imminent danger for VBrick’s business operations, the court had no option but to deny VBrick’s request for injunctive relief.

 

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.

Excessive Geographical Limitation in Connecticut Non-Compete Agreement Found Unenforceable

Timenterial, Inc. v. Dagata, 29 Conn. Supp. 180
Case Background

Timenterial was a company that engaged in the sale and rental of mobile units and had previously employed Mr. James Dagata.  The employment contract contained a non-compete clause wherein Mr. Dagata agreed not to “engage in any business venture having to do with the sale or rental of mobile homes or mobile offices in a fifty miles radius from any existing Timenterial, Inc. sales lot” for one year following the termination of his employment.

Mr. Dagata terminated his employment on June 1, 1970, and Timenterial claimed that he had been active in business ventures involving mobile homes beginning June 12, 1970, at an office located a mere one-quarter mile from Timenterial’s Plainville, CT office.  Timenterial commenced a suit for violation of the non-compete agreement and sought to restrain Mr. Dagata from further mobile home business ventures in accordance with the agreement.

The Court’s Decision

The court found in favor of Mr. Dagata and held that the non-compete agreement was unenforceable because the geographical restriction in the agreement was unreasonable and excessive.  At the time of legal proceedings, Timenterial had seven facilities in Connecticut, four in Massachusetts, two in Vermont, and one in New Hampshire.  The court applied the fifty-mile radius as stipulated in the agreement and held that this territorial prohibition was unreasonable.

The application of the agreement would mean that Mr. Dagata could not be involved in the mobile homes business in all or substantial parts of Connecticut, New York, Massachusetts, Vermont, New Hampshire, and Rhode Island.  This placed excessive restrictions on Mr. Dagata and severely limited the opportunity for him to practice his occupation.  This excessive and burdensome characteristic of the non-compete rendered the agreement unenforceable and the court concluded that Mr. Dagata’s actions did not constitute a breach of the restrictive covenant.

 

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.

Duration of Connecticut Non-Compete Agreement Reduced by the Court

Access America, LLC v. Mazzotta, 2005 Conn. Super. LEXIS 2597
Case Background

Ms. Vassilia Mazzotta worked at Access America, LLC, a franchised office affiliated with Century 21 Real Estate, as a licensed real estate broker.  She sold single and multi-family residential real estate in conjunction with her job at Access America until she terminated her employment on April 20, 2005.  There was an employment contract between Ms. Mazzotta and Access America that contained a non-compete clause wherein it stipulated that Ms. Mazzotta could not “engage in or carry on directly or indirectly, a business similar to or competing with any business or products carried on by [Access America] within a fifteen (15) mile radius of 136 Berlin Road, Cromwell, CT (Access America’s office)”.

Shortly after her termination with Access America, Ms. Mazzotta began to work at ERA Innovative Realty, a competing real estate broker well within the fifteen-mile radius as defined in the non-compete covenant of the employment agreement.  Access America brought suit against Ms. Mazzotta and sought injunctive relief in the form of enforcement of the non-compete covenant.  Ms. Mazzotta conversely argued that she signed the restrictive covenant under duress and that its provisions were unreasonable, therefore making it unenforceable.

The Court’s Decision

The court found in favor of Access America, holding that the non-compete agreement was valid and enforceable but did amend its provisions in a way that lessened the occupational hardship placed on Ms. Mazzotta.  The court justified its holding by first discussing the public policy of the issue.  It stated, “It has long been recognized in this state [Connecticut] that a restrictive covenant is a valuable business asset which is entitled to protection”.  Access America, according to the court, had legitimate reasons for using a non-compete agreement to protect its business interest in the form of the money, time, and effort it spent to train Ms. Mazzotta.

The court found Ms. Mazzotta’s defense of signing the agreement under duress to be unpersuasive because the same agreement that contained the restrictive covenant also contained clauses that conferred considerable benefits on her in the form of a private office and a higher commission rate on real estate sales.  In addition, the court cited Ms. Mazzotta’s termination letter wherein she reaffirmed her obligations and prohibitions under the employment agreement.

Reducing the Duration of the Non-Compete Agreement

The one portion of the decision that Ms. Mazzotta found favorable was the reduction in applicable duration for the non-compete agreement.  The court reduced the two-year prohibition down to only one year.  During the legal proceedings, both parties were open to the possibility that the court could reduce the duration of the restriction if in the end it found the non-compete to be valid and enforceable.

Both parties referenced an earlier case, Century 21 Access America v. Nereida Lisboa (35 Conn. L. Rptr. 272 (Conn. Super. Ct. 2003)) where a court had reduced the duration based on the specific language of the employment agreement and specifically the non-compete clause.  This portion of the decision is very valuable as it shows that certain non-compete agreements, depending on the specific language used, are enforceable but the court has the authority to amend the provisions to lessen the restrictions placed on the employee.

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.

What to Know About Your Non-Compete Agreement

In the current economic environment, understanding your obligations under a non-compete agreement could be essential to finding new employment. In uncertain times, an employee may not understand that not all non-compete agreements are enforceable. Here are seven (7) important things to know about non-compete agreements.

(1)        Courts do not view all non-compete agreements equally:

Courts view non-compete agreements ancillary to the sale of a business or between partners differently than they view non-compete agreements between an employee and employer. “When an employee agrees to be subjected to future work restrictions, he or she does so in order to obtain employment and ordinarily gets nothing in return for giving up this important freedom.  Thus the employee is at a great bargaining disadvantage.”  CT Cellar Doors, LLC v. Stephen Palamar, 2010 Conn. Super. LEXIS 3247, J.D. of Waterbury, Docket No. UWY-CV-10-5016075-S (2010). Therefore, the courts will view such a non-compete with great scrutiny.

(2)        Reasonableness requirement:

By definition, a non-compete is a restrictive covenant that prevents employees from competing with their former employers after termination, thereby creating a restraint on the free market. Given this, Connecticut courts may find that these covenants are against public policy. Consequently, non-compete agreements are only enforceable if the restraint imposed is reasonable.

(3)        Courts consider multiple factors in evaluating the reasonableness of a non-compete:

In deciding whether a particular non-compete agreement is reasonable, the court will look to the following factors: “(1) the length of time the restriction operates; (2) the geographical area covered; (3) the fairness of the protection afforded to the employer; (4) the extent of the restraint on the employee’s opportunity to pursue his occupation; and (5) the extent of interference with the public’s interests.” Robert S. Weiss and Associates, Inc. v. Wiederlight, 208 Conn. 525 (1988). The Connecticut Appellate Court has instructed that “the five pronged test is disjunctive; a finding of unreasonableness in any one of the criteria is enough to render the covenant unenforceable.” New Haven Tobacco Co., Inv. v. Perrelli, 18 Conn. App. 531 (1989).

(4)        Involuntarily termination not required:

A prevalent feeling among employees is that if “let go,” a non-compete should not apply.  However, this is not the law. When reviewing a non-compete agreement for reasonableness, the Court will not look to whether the employee left his position voluntarily or involuntarily.

(5)        Geography:

“The general rule is that the application of a restrictive covenant will be confined to a geographical area which is reasonable in view of the particular situation.” Scott v. General Iron, 171 Conn. 132 (1976) (upheld statewide restriction). Geographic restrictions should be “narrowly tailored to the plaintiff’s business situation.” Robert S. Weiss & Associates, Inc. v. Wiederlight, supra, 208 Conn. at 531. In CT Cellar Doors, LLC v. Stephen Palamar, supra, the Court held that a three-year restriction that covered the entire State of Connecticut was unenforceable, unfair and an unreasonable restraint of trade and was contrary to public policy.

Compare that to Robert S. Weiss and Associates, Inc. v. Wiederlight, supra, where the Supreme Court held that a two-year restriction that covered a 10-mile radius of Stamford, was narrowly tailored and therefore reasonable.  See also, Access America, LLC v. Mazzotta, 2005 Conn. Super. LEXIS 2597, J.D. of Middlesex, Docket  No. CV-O5-4003389 (2005)(15-mile restriction upheld); compare, Trans-Clean Corp. v. Terrell, 1998 Conn. Super. LEXIS 717, J.D. of Fairfield, Docket No. CV-97-0348039-S (1998) (60-mile restriction held unreasonable).

(6)        Duration:

Connecticut courts have frequently enforced non-compete periods of a year or more.  However, the courts have stated that the reasonableness of time and geographic restrictions in non-compete agreements are intertwined and “that broad geographic restrictions may be reasonable if the duration of the covenant is short, and longer periods may be reasonable if the geographic area is small.” Van Dyck Printing Company v. DiNicola, 43 Conn. Supp. 191 (1993), affirmed per curiam 231 Conn. 272 (1994) (one year);  Robert S. Weiss & Assoc. v. Wiederlight, supra (two years); Hart Nininger & Campbell Assoc. v. Rogers, 16 Conn. App. 619 (1988) (two years); Scott v. General Iron & Welding Co., 171 Conn. 132 (1976) (five years); Torrington Creamery, Inc. v. Davenport, 126 Conn. 515 (1940) (two years).

(7)        Forfeiture Clauses:

Forfeiture clauses differ from non-compete agreements in that the employee does not make an express promise not to compete, but rather agrees to a forfeiture of benefits if the employee engages in competition with its former employer. Despite this difference, the Connecticut Supreme Court has held that “a covenant not to compete and a forfeiture upon competing are but alternative approaches to accomplish the same practical result.” Deming v. Nationwide Mut. Ins. Co., 279 Conn. 745 (2006). Consequently, forfeiture clauses are subject to the reasonable requirement of non-compete agreements.

Conclusion

Before signing a non-compete agreement, speak to an attorney who is well versed in the law surrounding restrictive covenants and employment contracts.  If you have already signed the non-compete agreement, contact an attorney before pursuing a course of conduct that might violate a non-compete clause. A violation of a non-compete may result in legal action brought against you by your former employer, whether or not such agreement is enforceable.  Situations involving non-compete agreements are very fact specific, requiring case-by-case analysis.

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

Connecticut Law Governs Non-Compete for Employee Based in Company’s Brazil Office

MacDermid, Inc. v. Selle, 535 F.Supp.2d 308

Mr. Raymond Selle worked for MacDermid, Inc. for thirty years in various capacities at facilities in Connecticut, Maryland, and Sao Paulo, Brazil.  MacDermid is a specialty chemical company engaged in a range of development, manufacture, and sale of chemicals and their corresponding processes.  Mr. Selle resigned from the company in 2007 while stationed in Brazil and immediately began work at Enthone, a West Haven based company with a presence in Brazil, as its South American New Business Development Manager.  MacDermid brought suit against Mr. Selle to enforce employment agreements from 1996 and 2002, seeking to prevent his employment at Enthone and the disclosure of confidential information.

MacDermid’s basis for legal action was two restrictive covenants signed by Mr. Selle and the vast amount of confidential information he acquired while employed at MacDermid.

Employment Agreement

The first “Employee’s Agreement” was signed November 24, 1996 and included a one-year non-compete agreement prohibiting employment with an industry competitor and an indefinite confidentiality agreement.  Mr. Selle signed a second non-compete and non-disclosure agreement on June 25, 2022 when he began his position at MacDermid’s Sao Paulo office.

Additionally, the agreement stipulated that its provisions were to be “construed and enforced in accordance with the laws of the State of Connecticut, without regard to conflict of law principles”.  MacDermid sought to enforce both the one-year non-compete clause and the indefinite confidentiality clause.  The company claimed that Mr. Selle was privy to considerable confidential information while employed there, including business strategies, research & development projects, and customer contact information and transaction history.

The Court’s Decision

The federal court found in favor of MacDermid, enjoined Mr. Selle from employment with Enthone or any other of MacDermid’s industry competitor until September 10, 2008 (the duration of the one-year prohibition), and enjoined him from disclosing any confidential or proprietary knowledge acquired during his employment with MacDermid.  The court found that there was “no basis for doubting the validity and enforceability of his [Selle’s] 1996 and 2002 employment agreements with MacDermid”.  Mr. Selle’s tried to make the claim that the restrictive covenants were too broad and favored the employer but the court concluded that the covenant’s provisions were narrow and limited in scope so as not to dramatically disadvantage the employee.

The court also discussed and decided what jurisdiction’s law to apply.  Mr. Selle argued that Brazilian law should govern the agreement and legal proceedings since that was where he found new employment at Enthone.  Mr. Selle made this assertion because he felt that Brazilian law reflects a fundamental public policy against the enforcement of restrictive covenants in employment contracts.  The court however held that Connecticut law superseded Brazilian law in this case and would govern the restrictive covenant, as specified and agreed to in the 1996 and 2002 agreements.

Conclusion

This case shows that in certain restrictive covenants, Connecticut law (or any state’s law) can be governing even when employment takes the employee out of the country.  The choice of law provision establishes the controlling legal principles (in this case, those of Connecticut) of the restrictive covenant and is characterized by global application.

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.

What To Know About Your Severance Package

During these economic times, many companies big and small, are facing the hard reality of layoffs. As hard as it is for companies, it is even harder for employees. Faced with no job and a bare economy, accepting a severance package might seem like the best choice.  But before signing anything, it is important to understand the basics of the severance package and the potential rights that might be relinquished in the process.

(1)        Time to Consider the Severance Package:

A prevalent misconception is that all employees are entitled to twenty-one (21) days to review severance package offers. Unfortunately, that is not the case.  In the case where the employer is only offering a severance package to one employee, and that employee is under the age of forty (40), there is no specific time to review the documents that is required by law. However, as the severance package must be made “knowingly and voluntarily,” that allows the employee some time to consider the severance agreement.  There is no statutory minimum amount of time.

If, however, the employee being offered the severance agreement is forty (40) years or older, he or she is protected by the Age Discrimination in Employment Act (“ADEA”) of the Older Workers Benefit Protection Act (“OWBPA”). By law, when only one employee is offered the severance agreement and a release of ADEA claims is included, the employer must provide the employee with twenty-one (21) days to review and consider the proposed severance agreement. Moreover, if the employer and employee engage in negotiations, the consideration period commences on the date of the employer’s final offer.

If more than one employee is terminated at or around the same time, it is considered a “group layoff.”  By law, when a severance agreement is offered as part of a group layoff, and a single employee is over the age of forty (40), and a release of ADEA claims is included, then every employee regardless of age must be given forty-five (45) days to consider the agreement.

(2)        Release of Claims:

Most severance agreements contain a release of a variety of claims, including claims you may have based upon your age, race, national origin, gender, disability, religion, among others. It may also include a release of all claims, whether known to you or not at the signing of the agreement.

However, the United States Equal Employment Opportunities Commission (“EEOC”) has held that, although the severance agreement may restrict the employee’s ability to file a lawsuit, the release cannot restrict the rights of an employee to file a charge of discrimination with the EEOC, nor can the severance agreement limit an employee’s right to testify, assist or participate in an investigation, hearing or other proceeding conducted by the EEOC. Furthermore, the EEOC has declared that an agreement cannot waive an employee’s rights regarding acts of discrimination that occur after the signing of the agreement.

(3)        Seven (7) Day Revocation Period:

When a severance agreement contains an ADEA release of claims, by law, the employer must provide you with seven (7) days to revoke the agreement after signing it. This seven (7) day window cannot be waived or changed by either party.

(4)        Ability to Consult with an Attorney:

Severance packages generally contain more than just the release of ADEA claims, but also claims under Title VII of the Civil Rights Act, Americans with Disabilities Act, Employee Retirement Income Security Act, retaliation, whistle blowing, breach of contract, invasion of privacy, among others. Given the breadth of the claims released, before the signing of a severance agreement, it is extremely important to consult with an attorney prior to its execution.

Moreover, when the severance agreement contains a release, the agreement must specifically advise the employee to seek the advice of any attorney.  Faced with financial distress because of the layoff, you may not be able to think objectively concerning your rights and options. It is best to consult an attorney.

(5)        Consideration:

Consideration is required for every agreement. That means that an employee must receive something of value in exchange for giving up certain rights. That “something of value” must be above and beyond what the employee would otherwise be entitled to.

(6)        Ability to Negotiate:

Despite the “take it or leave it” undertones of an employer, generally, many employers will negotiate severance on some level. Given that, there is also a risk that an employer will revoke the offer of severance if negotiation is attempted.  Your chances of negotiating successfully increase if there is a claim that your particular severance package is not fair in light of your industry, your position, or the circumstances of your employment.  Additionally, the negotiations do not need to focus on the dollar amount connected with the severance agreement.  Employers might be willing to extend insurance coverage, disability benefits, or other items.

(7)        Gather All Information:

Before deciding to accept, negotiate, or reject a severance package, it is important to understand completely what is being offered to you, including compensation, benefits and insurance.  If you are in an industry that provides for deferred stock options or bonus, it is important to understand whether you would still be entitled to it.   You should gather information concerning your employer’s welfare plans, health plans, vacation and sick leave policies, as well as any structured bonus plans or stock options.  If the severance package is only offering you what you would be entitled to, the agreement may lack adequate consideration.

(8)        Restrictive Covenants:

Many employers will place some kind of restrictive covenant into the severance package. These range from confidentiality clauses, to non- disclosure agreements, to non-solicitation agreements, to non-compete agreements.  Therefore, it is important to understand how signing the severance agreement may restrict your ability to find new employment.

Before you sign a severance agreement, it is important to fully understand your rights and the consequences of accepting the offer. The attorneys at Maya Murphy, P.C., have years of experience in all sectors of employment law. If you have any questions relating to your severance agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.