Posts tagged with "Employment Agreement"

Is a Bonus a ‘Wage’?: Not According to this Connecticut Supreme Court Decision

Are you currently employed in Connecticut and have been promised a year-end bonus or had been promised a year-end bonus and never received it?   A Connecticut Supreme Court decision may affect the amount of protection you are afforded under Connecticut law if your employer defaults or has defaulted on that promise.

This case addressed the question of whether a year-end bonus promised by an employer is considered a ‘wage’ for the purposes of the Connecticut Wage Act.  Answering that question in the negative, the Supreme Court denied a Connecticut employee the ability to proceed with a wrongful withholding of wages claim that he had initially pursued after his employer failed to pay out what the employee had thought to be a promised year-end bonus.

The Conditions of a Bonus Payment

Under this decided Supreme Court case, the amount of liability your employer will face for failing to pay out a promised year-end bonus will hinge upon how your employer defined the conditions under which a bonus would be paid.  If the conditions are specific goals set for you as an individual employee (e.g. a certain number of billable hours need to be reached), then under the Connecticut Wage Act your employer will be required to pay out that bonus as wages in accordance with their promise.

If they do not, you are afforded the protections of the Wage Act and can bring an action against your employer for wrongfully withholding wages.  In the case that this action is successful, it is possible that you could receive, by way of damages, twice the full amount of your bonus and any attorney fees incurred in pursuing the action.  In addition, due to the serious nature of such an offense, your employer could potentially be fined and/or imprisoned for their actions.

Unfortunately, however, if your employer was more ambiguous about the requisite conditions for a bonus, under this new case law, it is likely that they will be able to avoid liability for wrongfully withholding your wages.  If that is the case, while you can still pursue other causes of action against your employer, you will not be able to receive twice the full amount of your bonus or attorney fees.

Case Details

The events of this case unfolded as follows:   At the beginning of the employment relationship between an employee and a Connecticut law firm, the parties agreed that the employee’s annual compensation would consist of a base salary and a year-end bonus.  The employment contract called for this year-end bonus to be based on factors such as seniority, business generation, productivity, professional ability, pro bono work, and loyalty to the firm.

The employee remained at the firm for several years and each year he received his salary and the promised year-end bonus.  When the employee left the firm he discovered that he was not going to receive the year-end bonus for that last year of his employment.  To try and recover what he had thought was a promised bonus; the employee commenced an action against his employer alleging breach of contract and wrongful withholding of wages.

The Court’s Decision

The trial court dismissed the wrongful withholding of wages claim, determining that the year-end bonus was not ‘wages’ as defined by the Connecticut Wage Act.  The breach of contract claim, however, went to trial.  The Trial Court found in favor of the employee and awarded him damages in the amount of his year-end bonus plus interest.

On appeal, the Appellate Court upheld the Trial Court’s finding as to the breach of contract claim but reversed the Trial Court’s decision to dismiss the wrongful withholdings of wages claim.  The Appellate Court determined that the structure of the agreement as to the year-end bonus meant that the bonus could have been classified as ‘wages’ under the Connecticut Wage Act and therefore held that the employee could proceed with his wrongful withholding of wages claim.

The issue of the wrongful withholdings of wages claim was appealed to the Connecticut Supreme Court where the Court decided that because the employee’s bonus was discretionary, (not ascertainable by applying a formula) it did not constitute ‘wages’ under the Connecticut Wage Act.  The employee, therefore, was not able to proceed with his wrongful withholding of wages claim.

Although the employee did recover some monetary damages through his breach of contract claim, it was not anywhere near as much as he would have received if he had been able to proceed with his wrongful withholding of wages action.

Importance of Knowing the Terms of Your Bonus

It is quite possible that after the release of this opinion many employers will revisit their bonus policies to make the language a little less precise or announce that their bonuses are discretionary in order to take advantage of the protections afforded under this case.  It is important, therefore, that as an employee you are aware of what kind of bonus you have been promised so that you know how strongly to rely on that promised bonus and what options are available to you if the employer refuses to pay.

If you have already been denied your year-end bonus and believe that it was a discretionary bonus, there are still ways in which you can potentially recover that lost income, such as the breach of contract claim pursued by the employee in this case.  If you have been denied a year-end bonus that was not discretionary and you had met the required conditions for receiving that bonus, you are still protected under the Connecticut Wage Act and can bring a wrongful withholding of wages action against your employer.  This action may allow you to receive damages in the amount double your bonus and possibly receive any incurred attorney fees.

If you have any questions regarding employment and labor law in Connecticut, please contact Joseph C. Maya, Esq. He can be reached at (203) 221-3100 or via e-mail at Mr. Maya handles cases involving employment contracts, separation agreements, non-competition agreements, restrictive covenants, union arbitrations, and employment discrimination cases in New York and Connecticut.

I Was Injured at Work and Cannot Complete my Usual Job Requirements. Will I Need Legal Assistance in Connecticut?

If you are injured at work and become unable to fulfill your normal job requirements you still have employment rights.  Your rights depend on your employment agreement, but these rights should protect you from being let go from your position due to your injuries.  In this case it would be wise to contact an attorney who is well versed in employment law, who can easily review the facts of the case as well as your employment agreement, and give you a definitive answer.

If you have any questions regarding employment law in Connecticut, please contact Joseph C. Maya, Esq. at (203) 221-3100 or e-mail him directly at

Effects on a Non-Compete Agreement When a Company Splits and Grants a License to the New Entity

Multicare Physicians & Rehabilitation Group, P.C. v. Wong, 2006 Conn. Super. LEXIS 1351

Multicare Physicians & Rehabilitation Group, P.C. was a Connecticut company that provided healthcare services and maintained offices in Milford, Ansonia, Wallingford, and Cheshire.  Dr. Wong began to work for the company and executed an employment agreement on January 21, 2004, pursuant to the company’s employment regulations and standards.  There was a restrictive covenant in paragraph nine of the agreement that prohibited Dr. Wong from practicing within fifteen miles of “the corporation’s offices” within the four towns previously mentioned for a period of two years following termination.  The agreement stated that Physicians would be entitled to equitable and legal damages (a court ordered injunction and monetary relief respectively) in the event of a breach.

The company split up in the summer of 2004 into Physicians and a new company, Multicare Medical Center, P.C. (“Medical”), that practiced out of the Milford and Ansonia offices previously occupied by Physicians.  Physicians licensed “the Name” to Medical in exchange for consideration for $10, and this license gave Medical the right to brand and advertise itself as Physicians.  Medical officially became “independently owned company” on August 6, 2004.

In August 2005, Dr. Wong gave Physicians notice that he would not be renewing his employment contract with them and then proceeded to accept a part-time position at Medical beginning in December 2005.  Physicians learned of Dr. Wong’s new employment and interpreted this as in direct violation of the non-compete clause contained in the employment agreement.  Physicians sued Dr. Wong in Connecticut state court and requested enforcement of the restrictive covenant.

The Court’s Decision

The court had to decide whether Dr. Wong had violated the non-compete agreement by working as an employee of Medical, for which it concluded that he had not breached the employment contract with Physicians and denied the company’s request for an injunction restraining Dr. Wong’s further employment at Medical.  The main factor that the court analyzed to reach this conclusion was the existence and terms of the license granted to Medical by Physicians on June 30, 2004.

The court made it clear that since the company split in 2004, Physicians did not have any offices in Milford or Ansonia and as such, Dr. Wong was free to practice medicine in these towns without violating the non-compete clause.  Medical was permitted to operate as Physicians by using its name pursuant to the license but the offices in Milford and Ansonia were not by any means components of Physicians’ business structure or operations.  Those offices, while under the trade name of Physicians, were wholly owned and operated Medical business offices.

This decision highlights the special relationship between companies when they split and one party grants the other a license to continue to operate under the same trade name.  The court emphasized that while the companies were the same with respect to their trade name, for all other intents and purposes they were completely separate companies with different business structures and operations.

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

Enforceability of Non-Solicitation Agreement for Potential Clients of Former Employer

Webster Financial Corporation v. McDonald, 2009 Conn. Super. LEXIS 169

USI Insurance Services of Connecticut, Inc., formerly Webster Insurance, Inc., employed Mr. William McDonald as a senior vice president at its Westport, CT office.  The company had Mr. McDonald sign an employment agreement dated February 11, 2003 that contained non-compete and non-solicitation clauses in the event of his termination.  The agreement prohibited Mr. McDonald from soliciting any of USI’s contacts that had been clients or potential clients in the twelve months prior to his termination and established a geographical limit of twenty-five miles within USI’s Westport office.

As for the time limitation, the covenant was applicable for the great period of two years following Mr. McDonald’s termination or as long as he received benefits from a deferred compensation plan.  Mr. McDonald resigned on September 21, 2007 and began to work at Shoff Darby, Inc., an industry competitor well within the prohibited twenty-five radius of USI’s Westport office.  At his new firm, Mr. McDonald proceeded to solicit and sell insurance products to USI’s former and current clients.  Additionally, he contacted several USI employees and urged them to leave the company to seek employment with Shoff Darby.

Enforcing the Agreement 

USI sued Mr. McDonald and asked the court to enforce the provisions of the restrictive covenant.  Mr. McDonald presented two defenses to the court, arguing that the agreement was overly broad and therefore unenforceable.  He claimed that the prohibition of potential clients and the potential unlimited duration made the non-compete agreement unreasonable and unenforceable.

USI asserted the validity of the agreement and emphasized to the court that it contained a “blue pencil” provision that authorized the court to amend the time and/or geographical limitation in order to comply with Connecticut law.  Mr. McDonald countered this argument stating that this legal procedure would require the court to essentially rewrite the non-compete contract, an act forbidden under Connecticut law.

The Court’s Decision

The court found in favor of USI with regard to the issue of the agreement’s enforceability with its holding stating, “taking the covenant as whole, nothing on the face of the contract renders the covenant unenforceable as a matter of law”.  While deliberating about the claim that the prohibition on potential clients was unreasonable, the court stated that there is no direction or precedent from the Connecticut Appellate Courts and that the Superior Courts throughout the state were divided on the issue.

This court took the approach used in Cuna Mutual Life Ins. Co. v. Butler (2007 Conn. Super. LEXIS 1623) that such limitations on potential clients are reasonable so long as they are “readily identifiable and narrowly defined”.  The court concluded that the potentially unlimited applicable duration of the agreement was not “per se unreasonable” because the agreement as a whole contained several other definitive restrictions such as the twenty-five radius from the Westport office and the limited group of clients for the anti-solicitation clause.

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

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

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

Five Things that Make a Connecticut Non-Compete Enforceable

The Fairfield County employment lawyers here at Maya Murphy, P.C., have advised numerous residents of Greenwich, New Canaan, Stamford, Darien, and Westport about the enforceability of non-competition provisions contained in Employment Agreements or Separation Agreements.  While every case, and the wording of every agreement, is different, there are five “constants” that Connecticut courts look to in deciding whether or not to enforce a non-competition clause.  They are the starting point for any discussion or individual analysis of whether a particular non-compete may be enforceable as to you. Again, every case turns upon its own peculiar facts.

The key concepts are:

  • The reasonableness of the time restriction.  

As a general proposition, a time restriction of up to three years is generally found to be reasonable.  That can vary, however, depending upon the industry involved.  In the world of information technology, for example, a particular product’s “shelf life” may be measured in months, rather than years, and an IT employer may not need to put a former employee on the sidelines for a longer period of time (see #’s 3 and 4 below).

  • The reasonableness of the geographical restriction.  

An employer is entitled to no more non-competition protection than it requires.  Stated differently, a company in Connecticut doing business only east of the Mississippi river should not be able to preclude a former employee from joining a competing company anywhere in the United States.  The broader the geographical restriction the greater the judicial scrutiny.

  • The degree of protection afforded to the employer. 

An employer is generally entitled to protect its existing business and client or customer base, together with current and realistic plans for expansion.  A hedge fund typically will not be able to prevent a former employee from working outside of the financial industry, and a start-up will not garner protection for grandiose or “pipe-dream” plans to capture an entire industry.

  • Does it unnecessarily restrict an employee’s ability to pursue his or her career? 

While non-competes are enforceable in Connecticut, Judges are reluctant to order an individual not to pursue his or her chosen profession or livelihood.  In a severely depressed job market, the mere existence of a prior non-compete provision can sound the death knell of a job search and this enforceability aspect requires careful analysis by an experienced employment attorney.  We at Maya Murphy can “compare and contrast” the language of a particular non-compete with the countless others we have seen before to advise you as to its likely enforceability, or whether an employer can be convinced to scale back its reach.

  • The degree to which it interferes with the interests of the public. 

Here, an extreme example best illustrates the point.  We represented a pediatric cardiac surgeon in seeking to avoid a non-compete.  Obviously, such skilled physicians are rare and society benefits greatly from the availability of their services.  The public is best served by minimizing restrictions on their employment and maximizing the availability of their life-saving skill.

These five “constants” are viewed separately; a non-compete provision can (but need not) be rendered unenforceable if it violates even a single factor.  The non-compete is viewed and evaluated in its entirety and courts may ascribe greater or lesser weight to a particular factor, but all enter into the final equation regarding enforceability.

The employment attorneys in Maya Murphy’s Westport, Connecticut office stand ready to assist you in determining whether, or to what extent, you may be subject to a non-compete contained in an Employment Agreement or Separation Agreement.  No two cases are the same; there are always differentiating facts and circumstances.  Thus, you should consult with an experienced practitioner to determine where you stand.  For further information, call Maya Murphy at (203) 221-3100.

Change in Business Services/Products Doesn’t Invalidate a Non-Compete Agreement

DiscoveryTel SPC, Inc. v. Pinho, 2010 Conn. Super. LEXIS 2683

In 2002, DiscoveryTel SPC hired Mr. Ismael Pinho as its chief financial officer (CFO) as an at will employee.  The parties later executed an employment agreement on December 27, 2004 that would go into effect January 1, 2005.  The employment contract modified Mr. Pinho’s employment from at will to a one-year automatic renewable basis and outlined his salary, incentive bonuses, vacation, personal days, insurances, severance package, and several restrictive covenants.

Mr. Pinho was prohibited from directly or indirectly competing with DiscoveryTel by being involved in the purchase and/or sale of international voice and traffic data systems during the term of the employment agreement or during any period for which he was receiving severance pay.  Additionally, the agreement stated that he was bound by an indefinite non-disclosure clause pertaining to DiscoveryTel’s confidential and proprietary information.

In between 2004 and 2010, DiscoveryTel experienced a corporate reorganization and shifted its focus and the services it provided.  By 2010, it was no longer engaged in the purchase and/or sale of international voice and data traffic but instead facilitated the sale of telephone traffic.

The Defense’s Argument

Mr. Pinho informed the president of DiscoveryTel in a May 21, 2010 letter that he had accepted a position with World Telecom Exchange Communications, LLC (WTEC) and would be starting at the new company on June 1, 2010.  DiscoveryTel brought suit and requested that the court grant its request for an injunction to prevent any violations of the restrictive covenants in connection to Mr. Pinho’s new employment.  Mr. Pinho did not have an issue with the non-disclosure clause in the employment contract but asserted that his mere employment with WTEC was not a violation of the non-compete agreement.

He contended that the agreement did not prohibit working for a competitor but rather specifically from “being involved in ‘any business relating to the purchase and sale of international voice and data traffic’”.  He went on to argue that engaging in this sector of the industry should not violate a non-compete agreement because DiscoveryTel was no longer engaged in that specific industry activity.  Additionally, he argued that the agreement had inadequate consideration and was therefore unenforceable.

The Court’s Findings

The court found these arguments unconvincing however and granted DiscoveryTel’s request for injunctive relief and restrained Mr. Pinho from working for WTEC until December 31, 2010 (the end of the current employment term) in order to prevent further violations of the non-compete agreement.  It looked to the modification in the nature of Mr. Pinho’s employment (from at will to a contract renewable on an annual basis) and enhanced benefits (mainly the introduction of a severance package) in the employment agreement to conclude that there was sufficient consideration.

Finally, the court analyzed whether Mr. Pinho’s activities as an employee of WTEC violated the covenant, taking into account DiscoveryTel’s reorganization and shift in focus.  The court ultimately held that Mr. Pinho had indeed violated the non-compete agreement by working at WTEC and that a mere change in business services/products did not render the non-compete agreement invalid or release Mr. Pinho from its obligations.

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

Assignability of Non-Compete Agreements Under Connecticut Law in the Event of a Merger

Neopost USA, Inc. v. McCabe, 2011 U.S. Dist. LEXIS 105850

Neopost USA, Inc. and Pitney Bowes, Inc. are two companies that essentially hold a duopoly on the national “mailing equipment” market, an industry that includes postage meters, mailing machines, addressing machines, folders, inserters, and relevant software.  Neopost, Inc. employed Mr. John McCabe from 2002 to August 1, 2011 but did not have him sign a non-compete agreement until February 2005, at which time he received a pay raise in connection with a corporate reorganization.

The parties executed a subsequent restrictive covenant in March 2006.  The agreements prohibited Mr. McCabe from engaging in competitive business activities for one year following termination within fifty miles of any Neopost office where he had worked during his employment with the company.  Additionally, he could not solicit Neopost’s customers or employees during the specified one-year period.  Neopost,, Inc. merged with Hasler, Inc. and the transaction became official in November 2009 with the creation of a new company, Neopost USA that assumed title to Neopost, Inc.’s assets and liabilities.

The Dispute

Mr. McCabe’s last day with Neopost was August 1, 2011 and he began to work for Pitney Bowes, its direct and main competitor, only a few days later.  There was a dispute between the parties regarding whether Mr. McCabe voluntarily terminated (resigned) his employment with Neopost or the company fired him.

Neopost sued Mr. McCabe in federal court for violation of the non-compete agreement and requested that the court enforce the provisions of the covenant in order to prevent further breaches of the agreements executed by the parties.  Mr. McCabe argued that his non-compete agreement with Neopost, Inc. were not assignable to Neopost USA, Inc. after the merger with Hasler, Inc. and thus, he was not bound by the provisions contained therein.

The Court’s Decision

The court rejected Mr. McCabe’s defense and granted Neopost’s request for injunctive relief and the enforcement of the non-compete agreements.  The court did not bother deciding the question of fact regarding the classification of Mr. McCabe’s termination.  Provisions of a non-compete are automatically triggered upon termination, regardless of whether it is voluntary or involuntary in nature.  The issue at hand and the focus of the court was the validity and enforceability of the non-compete agreements between Neopost and Mr. McCabe.

The court held that the non-compete agreements were assignable to Neopost USA following the merger, citing Connecticut law that “all property owned by, and every contract right possessed by, each corporation or other entity that merges into the survivor is vested in the survivor without reversion or impairment”.  Conn. Gen. Stat. § 33-820(a)(4).  In the event of a corporate merger, the surviving company holds title to all contracts and employment agreements of the predecessor companies and their provisions are valid and enforceable under Connecticut law.

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

Court Invalidates Non-Compete Agreement for Unreasonable Restrictions

Trans-Clean Corp. v. Terrell, 1998 Conn. Super. LEXIS 717

Trans-Clean Corp. was a company engaged in the business of restoring exteriors and interiors of commercial buildings.  The company began to employ Mr. Alton Terrell as a salesman and manager in December 1990 in connection with the company’s acquisition of Travel Washer, Inc..  The parties executed an employment agreement that created a one-year term of employment, specified the compensation schedule, and contained a non-competition covenant.  The non-compete agreement stated that Mr. Terrell was prohibited for two years following the completion of his employment contract or any renewal thereof from competing with Trans-Clean within sixty miles of the company’s main office in Stratford, CT.

The parties negotiated a pay increase in 1993 and a new compensation schedule was created.  Trans-Clean considered this a renewal of the original employment contract and held the belief that the non-compete agreement was still valid and in effect.  Mr. Terrell however did not share the same view and did not treat the pay increase and new compensation schedule as a renewal of the original contract.  While the parties had different interpretations of the pay increase, there were no direct discussions to clarify its characteristics.

The Dispute

Mr. Terrell suddenly resigned from Trans-Clean in September 1997 and proceeded to create his own commercial restoration company and solicited business from individuals/businesses on Trans-Clean’s customer list.  Trans-Clean sued Mr. Terrell and asked the court to issue an injunction to enforce the non-compete agreement and prevent any further violations.  The court had to tackle two central issues to decide the dispute: 1) whether customer lists are protected trade secrets and 2) the nature and reasonableness of the employment contract and non-compete agreement.  It held that the lists were not trade secrets that entitled Trans-Clean to an injunction and further concluded that the non-compete agreement was unreasonable and unenforceable.

The court held that the customer lists were not trade secrets or confidential information that required protection.  There was never a company policy to designate the lists as confidential information or maintain a degree of secrecy of customers or contact persons.  Furthermore, each salesperson maintained his or her own personal contact lists and did not have any direct access to other sales representatives’ lists.  Each salesperson had the responsibility of developing his or her list, maintaining business relationships, and collecting accounts.  These lists did not amount to a business interest for which Trans-Clean was entitled to protection and injunctive relief.

Reasonableness of the Covenant

Next, the court assessed the reasonableness of the covenant not to compete and found that its provisions, specifically the geographical restriction, were unreasonable and unenforceable.  The sixty-mile radius restriction covered 75% of Connecticut, including the state’s six major metropolitan areas (Bridgeport, New Haven, Hartford, Waterbury, Stamford, and Danbury), and extended into parts of New York (including four out the five boroughs) and New Jersey.  The restriction, according to the court, was overreaching and unnecessarily infringed on Mr. Terrell’s ability to purse his occupation and obtain future employment.  He had twenty years of experience in the commercial restoration industry and it was the only field in which he had ever worked.

Renewal of the Original Agreement

Lastly, the court analyzed whether the pay increase and modification of the compensation schedule amounted to a renewal of the original agreement.  The court stated there was a “question of fact” that it needed to answer in order to decide the case.  It noted that the writing drawn up by the company regarding the pay increase did not make any reference to the original employment contract and there was no apparent connection between the two writings.

In the absence of any reference or connection, the court concluded that the pay increase was not a renewal or extension of the original employment contract.  The court noted however that Mr. Terrell “should be bound by the non-compete agreement if that agreement is found to be reasonable”.  The court’s earlier analysis revealed that the covenant was in fact unreasonable, thereby overriding Mr. Terrell’s obligation to abide by its provisions.

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