Posts tagged with "invalidate"

When is A Non-Compete Geographical Limitation Unreasonable?

In Braman Chemical Enterprise, Inc. v. Barnes, 2006 Conn. Super. LEXIS 3753, Ms. Valerie Barnes worked as an exterminator for Braman Chemical Enterprises, Inc. from November 5, 1990, to April 26, 2006.  On October 24, 1990, in preparation for Ms. Barnes beginning to work, the parties executed a non-compete agreement titled “Restriction Against Other Employment After Termination of Work With Braman Chemical Enterprises, Inc.” where it stated that Ms. Barnes was prohibited from working at any branch of a pest control business within fifty miles of the Hartford City Hall for a period of six months.  The company provided pest control services to commercial and residential customers in approximately ninety percent of Connecticut’s towns and cities.  Ms. Barnes worked the majority of her career with Braman servicing the area defined as east of New Haven, west of Guilford, south of Meriden, and north of the Long Island Sound.  She received training for her operator’s license while employed by Braman but obtained her supervisor’s license on her own time and at her own expense.

On April 26, 2006, Ms. Barnes voluntarily terminated her employment at Braman and formed a Connecticut limited liability company called “Bug One, LLC” based in Hamden that provided substantially identical services as her previous employer.  Braman sued Ms. Barnes in Connecticut state court to enforce the non-compete and enjoin her from further violations of the restrictive covenant’s provisions.  Ms. Barnes asserted that the geographical limitation in the agreement was unreasonable and provided an unnecessary amount of protection for Braman.

The court found Ms. Barnes’ argument to be meritorious and denied Braman’s request to enforce the agreement.  A non-compete agreement is analyzed in its entirety but a single unreasonable provision can be sufficient to invalidate the entire agreement and prevent enforcement.  Connecticut courts have traditionally tended to apply greater scrutiny to a non-compete agreement that creates a general restriction on a geographical area than agreements that focus simply on doing business with the employer’s clients.  Employers are legally allowed to protect themselves in a “reasonably limited market area” but may not overreach to the degree that the restriction prevents the former employee from practicing his or her trade in order to make a living.  While Braman contended that the geographical limitation was reasonably tailored to meet its legitimate business needs, the court held that the provision went well beyond the “fair protection of plaintiff’s [Braman’s] interests”.  The geographical area of fifty miles from Hartford City Hall placed an unreasonable restraint on trade for Ms. Barnes.  The court notes that the prohibited area covered roughly two million potential customers and an area of 7,850 square miles, covering parts of Connecticut, Massachusetts, Rhode Island, and New York.  To put this in perspective, the entire state of Connecticut is only 5,018 square miles.  This area as defined in the non-compete agreement was thus an unreasonable limitation and sufficient cause to invalidate the entire 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.

Termination Does Not Invalidate a Non-Compete Agreement

Termination Does Not Invalidate a Non-Compete Agreement

Built In America, Inc. v. Morris, 2001 Conn. Super. LEXIS 2953

Mr. Michael Morris was the owner of Built In America, Inc. until he sold his entire stock in the company to Mr. Marc Costa in October 2000. The parties executed a Purchase and Sale Agreement that legally transferred the stock and ownership of the company. The transaction included an employment contract for an initial period of two years and a non-compete clause that became effective upon Mr. Morris’s termination from the company. The company terminated Mr. Morris in April 2001 and he proceeded to work in direct competition with his former employer. Mr. Costa and Built In America sued Mr. Morris for violation of the non-compete agreement and asked the court to enforce the agreement’s provisions. Mr. Morris argued that the restrictive covenant was null and void because the company had breached the employment agreement when it unlawfully terminated his employment.
The court found in favor of Built In America, ordered the enforcement of the covenant not to compete, and issued an injunction. There was no dispute over the reasonableness of the covenant, only a dispute over whether it became void when the company allegedly improperly terminated Mr. Morris. Built In America cited previous Connecticut cases, most notably Robert S. Weiss & Associates, Inc. v. Wiederlight (208 Conn. 525 (1988)), where the court held that termination did not invalidate a non-compete agreement. Furthermore, the court concluded that the company was justified with respect to its decision to terminate Mr. Morris’s employment, stating that his “behavior was so outrageous that one is left to believe he was inviting his discharge”. The court ultimately concluded that the covenant was legally binding and ordered its enforcement.
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.

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Court Invalidates Non-Compete Agreement for Excessive Restraint of Trade

Court Invalidates Non-Compete Agreement for Excessive Restraint of Trade
CT Cellar Doors, LLC v. Palamar, 2010 Conn. Super. LEXIS 3247

CT Cellar Doors was a Connecticut company owned by Mr. Claude Raffin that designed and installed custom metal basement entry doors, windows, and other accessories. Mr. Raffin hired Mr. Stephen Palamar in January 2006 as an installer and later promoted him to operations foreman on August 21, 2007. The promotion involved a substantial pay raise conditioned on Mr. Palamar signing a “noncompetition-nondisclosure agreement”. The parties executed the restrictive covenant wherein Mr. Palamar agreed to not compete with CT Cellar Doors anywhere within the state of Connecticut for three years following his termination from the company. Mr. Palamar voluntarily terminated his employment on May 24, 2010, registered himself as a home improvement contractor with the Connecticut Department of Consumer Affairs, and began doing business as Custom Cellar Doors. His new company advertised and performed the same services he performed while in CT Cellar Door’s employ.
CT Cellar Doors sued Mr. Palamar in Connecticut court for “irreparable harm to its goodwill, reputation, and name” and requested injunctive relief because there was no adequate remedy at law. Both parties agreed that the central issue of the case was “whether the agreement was enforceable under Connecticut law”. The court and parties likewise recognized that CT Cellar Doors had the burden to show that both parties signed the agreement and that Mr. Palamar had violated its provisions. Once/if those were established, then Mr. Palamar bore the burden to show that the agreement was unenforceable. The parties did not dispute, as a matter of fact, that the agreement was signed and that Mr. Palamar violated its terms. The dispute is over whether, as a matter of law, the agreement is valid and enforceable. The court ultimately found in favor of Mr. Palamar and held that the agreement executed by the parties was unreasonable and unenforceable.
Mr. Palamar presented two arguments to address whether the agreement was reasonable under Connecticut law: 1) the agreement had inadequate consideration and 2) it was an unreasonable restraint of trade. The court rejected the first argument, noted the substantial pay raise Mr. Palamar received, and held that it constituted adequate consideration. Although that defense failed, the court agreed with Mr. Palamar that the agreement was an excessive restraint of trade and the agreement was unreasonable because it denied him the right to earn a living in his chosen profession that he had had for twenty-five years. The court also noted that CT Cellar Doors did not present adequate evidence to demonstrate that they had experienced or were likely to experience irreparable harm. At the time that litigation began, CT Cellar Doors had fifty clients while Mr. Palamar only had two. CT Cellar Doors was not able to articulate a claim and present evidence that Mr. Palamar’s actions had damaged its business operations.
While CT Cellar Doors had a legitimate business interest to protect, the provisions of the non-compete went too far and placed oppressive occupational restraints on Mr. Palamar and excessively restricted his ability to secure future employment in his chose profession. This lack of balance between the interests of the parties ultimately led the court to find the restrictions unreasonable and for it to invalidate the non-compete agreement.
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.

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Excessive Geographical Restriction Invalidates Connecticut Non-Compete Between Dance Studio and Instructor

Excessive Geographical Restriction Invalidates Connecticut Non-Compete Between Dance Studio and Instructor
RKR Dance Studios, Inc. v. Makowski, 2008 Conn. Super. LEXIS 2295

This case involved the legal analysis used to determine if a non-compete agreement between a dance studio and one of its instructors is enforceable in the State of Connecticut. Jessica Makowski worked as an at-will instructor for RKR Dance Studios from November 29, 2001 to September 28, 2007 at one of its franchised dance studios. Maximize Your Impact, LLC became the franchisor for RKR in January 2004 and thus became the employer of Ms. Makowski. She signed a non-compete agreement with Maximize on May 5, 2006 that contained provisions specifying a two year duration and geographical limitation of fifteen mile radius from Maximize’s dance studio and a ten mile radius from any Fred Astaire Dance Studio, whether they be corporate-owned, franchised, or otherwise established. Ms. Makowski voluntarily left Maximize on September 28, 2007 and shortly thereafter began employment with Steps in Time, a dance studio located within ten miles of another Fred Astaire Dance Studio. Maximize sued Ms. Makowski to enforce the provisions of the non-compete agreement. Ms. Makowski contended that she did not violate the agreement because there was inadequate consideration and unreasonable limitations, characteristics that would make the non-compete agreement unenforceable. The court, while finding that there was adequate consideration, ultimately found in favor of Ms. Makowski, held the non-compete covenant to be unreasonable, and denied Maximize’s request for the court to enforce the agreement.
The major issue with regard to consideration in this case revolved around the question “is continued employment adequate consideration for a non-compete agreement?”. The court cited previous cases, both state (Roessler v. Burwell (119 Conn. 289)) and federal (MacDermid, Inc. v. Selle (535 F. Supp.2d 308)), where the courts concluded that continued employment was adequate consideration for at-will employees for restrictive covenants with their employers. The court highlights the exchange between the parties, such that the employee receives wages and the employer receives his or her services and the protection created by the non-compete agreement. The payment and receipt of wages was adequate consideration to legitimize a non-compete agreement and render vague terms sufficient for enforcement. The court did discuss several dissenting cases but noted that the facts of those cases were critically different from the legal dispute between Ms. Makowski and Maximize. The court emphasized that the pivotal fact with regard to continued employment as adequate consideration is whether it involves at-will employment. If there is at-will employment, as was the case with Ms. Makowski, then continued employment is sufficient consideration to render the non-compete agreement enforceable.
The agreement was ultimately found to be unenforceable however due to containing unreasonable restrictions. The court highlighted the public policy of non-compete agreement enforcement and the balance that must be struck between: 1) the employer’s need to protect legitimate business interests, 2) the employee’s need to earn a living, and 3) the public’s need to secure the employee’s presence in the labor pool. Fair protection must be afforded to employer and employee alike, a principle that is absent in the agreement between Ms. Makowski and Maximize. The court specifically stated that the geographical limitation was extremely unreasonable and placed a great hardship on Ms. Makowski’s efforts to earn a living and pursue her career. Evidence pertaining to job prospects in Massachusetts, Rhode Island, Connecticut, and New York revealed that the closest permissible studio to employ Ms. Makowski was located in Natick, MA, a staggering one and a half hour drive from her house. The court felt that a three hour daily, roundtrip commute was an excessive burden for Ms. Makowski to bear and concluded that this provision was indeed unreasonable and invalidated the agreement as a whole.

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