Posts tagged with "non-solicitation clause"

Court Enforces Non-Compete Agreement to Protect Employer’s Business Interests

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Webster Bank v. Ludwin, 2011 Conn. Super. LEXIS 127

Webster Bank is regional commercial bank with headquarters in Waterbury, Connecticut that provides financial services to customers in Connecticut, New York Rhode Island, and Massachusetts.  The company employed Mr. Michael Ludwin as a dual employee with UVEST Financial Services from January 2007 until the company terminated his employment in June 2010.  Mr. Ludwin signed a new employment agreement with Webster when he became a dual employee wherein the agreement contained a non-compete covenant.

The agreement, executed on February 7, 2009, prohibited Mr. Ludwin, for a period of one year following termination, from engaging in competing business activities within twenty-five miles of Webster Bank’s “base of operation”.  Additionally, he was obligated to refrain from soliciting Webster’s customers and to “treat as confidential the names and addresses of customers” (non-disclosure clause).

Non-Compete Breach

Webster terminated Mr. Ludwin in June 2010 and on July 9, 2010 he began to work for Harvest Capital, LLC, a Wethersfield, CT based financial consulting firm.  Webster’s counsel sent Mr. Ludwin a letter reminding him of his obligations under the non-compete agreement contained in his employment contract and demanded that he observe the enumerated restrictions.  The bank sued Mr. Ludwin in Connecticut state court for violation of the covenant not to compete when Mr. Ludwin failed to curtail his activities and requested that the court issue an injunction preventing any further breaches of the agreement.

The court granted Webster’s request and ordered that Mr. Ludwin “cease and desist from competing with the plaintiffs within a twenty-five mile radius of Hamden and Milford, Connecticut for a period to end on June 30, 2011” and further ordered him to return any and all customer lists that he removed from Webster’s premises.

The Court’s Decision

The court held that injunctive relief was necessary if it was to maintain the status quo between the parties.  Webster presented sufficient evidence to demonstrate that it would experience irreparable harm from Mr. Ludwin’s actions in the absence of an injunction.  Its customer lists and relationships are valuable business interests that are integral to the success of the company and as such the court identified that Webster had a legitimate business interest that was afforded protection under Connecticut law.  Furthermore, the court concluded that the agreement had reasonable provisions that did not excessively favor one party over the other or unnecessarily stifle their future business activities.

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.

Continued Employment is Inadequate Consideration in Absence of At-Will Employment

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Cost Management Incentives, Inc. v. London-Osborne, 2002 Conn. Super. LEXIS 3967

Cost Management Incentives, Inc. was a company that specialized in the placement of employees in the pharmaceutical industry.  This case addressed covenants signed by the company and two former employees, Ms. Yolanda London-Osborne and Ms. Kristen Herman.  The company presented the two employees with non-compete agreements in May 1996 after several years of employment.  The restrictive covenant contained a one-year non-compete clause and a two-year non-solicitation clause.

Neither woman was afforded the opportunity to consult with a lawyer to go over the agreement and both felt they were in jeopardy of termination should they refuse to sign.  The agreement did not offer anything in addition to their current salary and benefits.  Mr. David Hallen, the president and Chief Executive Officer of the company, gave them approximately five minutes to skim and sign the agreements, preventing the women from gaining a firm grasp on what their obligations were under the agreement.  The employees continued in their employment in same manner and with the same benefits until the company terminated them.

Inadequate Consideration

Cost Management sued the two former employees and asked the court to issue an order preventing any violations of the covenant.  Ms. London-Osborne and Ms. Herman both sought an order declaring that the agreement was unenforceable on the grounds of inadequate consideration and the inappropriate and egregious conduct of the company’s management.  Both former employees further contended that they did not breach the agreement and there was no indication that they were likely to do so.  The court found in favor of the former employees and held that the restrictive covenants were unenforceable because they lacked consideration and their provisions were so broad that they unnecessarily restricted their ability to procure future employment.

The restrictions in the agreement prohibited employment with any business enterprise engaged in facilitating temporary and/or permanent placement in the pharmaceutical industry for one year after termination.  The court found this specific nation-wide restriction to be reasonable since the company maintained national operations.

The court however found that the two-year non-solicitation clause was unreasonable and rendered the covenant unenforceable.  This was overly broad and restrictive since 70-75% of Cost Management’s business came from a mere six pharmaceutical companies.  The court commented that Cost Management should have tailored this clause to protect its legitimate business interests without placing such an extensive hardship on former employees.  Analysis of the covenants also led the court to hold that the provisions provided the employer with much more protection than was deemed necessary or permissible.

The Court’s Decision

While the finding of unreasonable provisions is sufficient to invalidate a restrictive covenant, the court went on to discuss the lack of consideration, a factor that also renders a non-compete agreement unenforceable.  Connecticut law indicates that continued employment is not adequate consideration for a non-compete agreement for employees that are not working on an at-will basis.  Continued employment is sufficient for employees working on an at-will basis but this was not the case with Ms. London-Osborne and Ms. Herman.

For these reasons, the court denied Cost Management’s request for injunctive relief and declared that the agreements were unenforceable and void 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 JMaya@Mayalaw.com.