Posts tagged with "restricting disclosures"

A Quick Guide to Separation Agreements and Severance Packages

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Separation Agreements

Today’s report on the lagging unemployment numbers serves as a stark reminder that the state of the economy, though on the upturn, continues to move at a slow pace and that unemployment is a very real problem facing too many people.  Attorneys in our Westport office continue to see a high number of Separation Agreements and severance packages by employees who have been laid off.  What those employees should know is that experienced employment law attorneys, such as those at Maya Murphy, P.C., can review those agreements to negotiate an enhancement or increase of the benefits received.

Because there is no such thing as a standardized severance package, each and every term is crucial and should be carefully scrutinized.  As such, no employee should feel obligated to sign a Separation Agreement and return it to his or her employer without subjecting it to further review and negotiation by employment attorneys with a wide breadth of knowledge in the field.

Severance Packages 

Severance pay refers to a voluntary offer of payment from an employer to an employee who has recently been laid off.  No law requires an employer to offer a terminated employee a severance package.  However, employers offer severance packages, among other reasons, to maintain goodwill with past and future employees, to prevent employees from appropriating trade secrets, customer lists, and other proprietary information, and to ensure that employees refrain from engaging in professional associations with competing companies or businesses, or “non-competition agreements,” a separate issue on which Maya Murphy attorneys are well-versed.

It is crucial to remember that the time in which to respond to and agree to a severance agreement can be very limited, often to no more than one or two weeks, meaning it is in a terminated employee’s best interest to consult with an attorney as soon as possible after receipt of an agreement.

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In sum, it is vital to have an attorney experienced in employment law take the lead on reviewing your Separation Agreement, negotiating with your company or business, and vigorously advocating on your behalf.  Should you be confronted with a Separation Agreement, contact an attorney at our Westport office at 203-221-3100.

Enforcing a Non-Compete Agreement in a Medical Partnership

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Fairfield County Bariatrics and Surgical Associates, P.C. v. Ehrlich, 2010 Conn. Super. LEXIS 568
Employment Background

Doctors Neil and Craig Floch created Floch Surgical Associates in 1999 in Norwalk, Connecticut to provide medical and surgical services to patients.  They decided to gear their practice toward bariatric surgery and hired Dr. Timothy Ehrlich, a board-certified general surgeon and graduate of Louisiana State University School of Medicine, in 2002.  He was granted surgical privileges at Norwalk Hospital and St. Vincent’s Hospital (in Bridgeport, CT) and operated as the only member of the medical group to perform bariatric surgeries exclusively.  On January 1, 2006, the two Floch doctors and Dr. Ehrlich formed Fairfield Bariatrics and Surgical Associates, P.C. (FCB).

Each doctor became a third shareholder in the professional corporation and signed identical employment agreements that outlined the compensation schedule, termination protocols, and included a non-compete agreement.  The non-compete prohibited each doctor, for two years after termination, from practicing general medicine/surgery within fifteen miles of FCB’s main office in Norwalk and barred performing bariatric procedures at hospitals located in Stamford, Norwalk, Greenwich, Danbury, and Bridgeport.

Doctors Neil and Craig Floch voted to terminate Dr. Ehrlich in July 2009 and notified him of the decision in a letter dated July 30, 1999.  They justified his termination by claiming that he repeatedly “misrepresented the group” and had lost his surgical privileges at Norwalk Hospital due to non-compliance with the hospital’s Trauma Service requirements.

Violating the Restrictive Covenant

Dr. Ehrlich proceeded to form his own limited liability company, Ehrlich Bariatrics LLC, on October 22, 2009 and opened offices in Waterford and Trumbull.  Both of these municipalities are located outside of the prohibited area created by the non-compete agreement but he also continued to perform operations at St. Vincent’s Hospital in Bridgeport, an activity expressly prohibited by the restrictive covenant.

FCB sued Dr. Ehrlich in Connecticut court and requested that the court enforce the provisions outlined in the non-compete agreement dated January 1, 2006.  The court found in favor of FCB, determined that Dr. Ehrlich had violated a valid non-compete agreement, and enforced the provisions of the covenant not to compete.

The court stated that the challenging party (Dr. Ehrlich for this case) bore the burden of proof to demonstrate that the agreement was unenforceable.  He asserted that he had not been properly terminated and that the agreement itself was unreasonable, and therefore unenforceable.  The court rejected both of these arguments and concluded that the agreement was valid and enforceable.

Improper Termination Argument

Dr. Ehrlich advanced the unconvincing argument that he was the victim of improper termination because the shareholders meeting at which the vote was taken to terminate his employment was not properly noticed pursuant to the corporation’s by-laws.  He essentially contended that the “lack of notice renders his termination a nullity”.

The court however disagreed with Dr. Ehrlich because a physician whose termination is being voted on is not entitled to cast a vote.  The lack of voting power for this matter meant that his presence was not required and he was not entitled to notice of the special shareholders meeting where the vote was taken.  The court ultimately concluded that Doctors Neil and Craig Floch had taken the proper and necessary steps in accordance with the corporation’s by-laws to terminate Dr. Ehrlich’s employment with FCB.

Unreasonable Provisions Argument

Next, Dr. Ehrlich unsuccessfully contended that the agreement contained unreasonable provisions and therefore the court was not obligated or permitted to order its enforcement.  Discerning the reasonableness of a non-compete agreement required the court to balance the competing needs of the parties as well as the needs of the public.

Furthermore, the challenging party must show that the provisions are unreasonable in scope.  First, the court established that FCB did in fact have a legitimate business interest that necessitated protection.  The company was entitled to protect potential new patients within a reasonably limited market area.  FCB was only concerned with future patients and did not seek to prevent Dr. Ehrlich from providing follow-up services to current or past patients.

Enforcing the Non-Compete Agreement

Next, the court addressed and cited a variety of case law that showed Connecticut courts’ history of enforcing non-compete agreements when they protect against “something other than mere competition”, including the use of customer lists, impaired of purchased good will, confidential data/trade secrets, use of information concerning potential clients in a limited area, or some other advantage the former employee acquired while working for the plaintiff company.  The court found that Dr. Ehrlich had greatly benefitted from his association with FCB and that his continued actions would negatively affect the reputation and business operations of his former employer.

Lastly, the court took time to address the differences between non-compete agreements for an employer-employee relationship and those for partnerships.  It held that since there was not unequal bargaining power or impaired ability to earn a living, the provisions were not unreasonable in scope.

The court noted that Dr. Ehrlich’s offices in Trumbull and Waterford did not violate the agreement and there were numerous hospitals located outside the prohibited area where he could find employment as a board certified surgeon specializing in bariatrics.  He had actually received encouragement from several doctors to apply for privileges at permissible hospitals, including the Hospital of St. Raphael in New Haven.

In light of Dr. Ehrlich violating a legally binding non-compete agreement that protected a legitimate business interest, the court ordered the enforcement of the restrictive covenant.

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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.

Four-Prong Test Applied to Enforce Non-Compete Provision in a Franchise Agreement

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Money Mailer Franchise Corporation v. Wheeler, 2008 Conn. Super. LEXIS 2260
Case Details

Mr. Douglas Wheeler entered into a Franchise Agreement with Money Mailer Franchise Corporation on February 28, 2003, wherein he was assigned a mailing territory comprised of thirteen zip codes in Fairfield and New Haven counties.  Money Mailer was a business that franchised a system of providing direct mail order advertising and related services.  The Franchise Agreement contained a non-compete covenant.

The non-compete prohibited Mr. Wheeler from engaging “in any Competitive Activities with the Territory [his thirteen zip codes] or within the territory of any other “Money Mailer” franchise then in operation” for a period of two years following termination.  This essentially obligated Mr. Wheeler to not engage in any competing business enterprise within fifty miles of any Money Mailer franchise.

Mr. Wheeler sold his franchise to Mr. Javier Ferrer on October 31, 2007 for $130,000.  He executed an additional non-compete agreement in connection with this transaction wherein he promised not to compete for three years following the closing of the deal.  In February 2008, he began to work as an Independent Contractor for Direct Advantage, a direct competitor engaged in the same business(es) as Money Mailer.

Money Mailer sued Mr. Wheeler for breach of the Franchise Agreement and requested that the court enforce the provisions contained in the non-compete agreement.  Mr. Wheeler acknowledged that he was involved in the exact same business addressed and prohibited in the non-compete agreement and admitted to soliciting several of Money mailer’s previous and current customers.

The Court’s Decision

The Connecticut state court granted Money Mailer’s request for injunctive relief and ordered the enforcement of the restrictive covenant.  The court stated that the purpose of injunctive relief was to preserve the status quo of the parties until the case was definitively decided.

It further noted the relevant standard of review for granting a request for an injunction and specified four factors: 1) no adequate remedy at law, 2) plaintiff would experience irreparable harm if the request was not granted, 3) plaintiff was likely to prevail on the merits of the case, and 4) an injunction would sustain the balance of the parties’ equities.  The court concluded that Money Mailer’s case met all of these requisite factors and its complaint warranted relief in the form of a temporary injunction.

The court concluded that an injunctive order was necessary to balance the parties’ interests during the legal proceedings and that the temporary injunction would essentially restore the parties to their relative positions before the alleged violation of the non-compete agreement.  Money Mailer was able to demonstrate that Mr. Wheeler’s actions had a detrimental impact its business interests.

Additionally, the court found that Money Mailer was likely to prevail on the merits of its complaint, specifically citing that Mr. Wheeler’s own testimony provided abundant evidence of activities that should trigger the enforcement of the restrictive covenant.  For these enumerated reasons, the court granted Money Mailer’s request for an injunction restraining Mr. Wheeler from further violations of the non-compete provisions contained in the Franchise Agreement executed between the parties in 2003.

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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.

Three-Year Restriction Found Unreasonable in CPA Non-Compete Agreement

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Haims, Buzzeo & Co. v. Wikstrom, 2003 Conn. Super. LEXIS 2539
Case Background

Ms. Nancy Wikstrom owned a certified public accounting firm, Wikstrom & Company, which she sold to Haims, Buzzeo & Co. (HBC) on January 1, 2001.  The purchase agreement outlined the obligations of the respective parties and contained a non-compete covenant.  Ms. Wikstrom was to stay on as an employee of HBC, continuing to work as a certified public accountant (CPA) and she agreed to bring her clients’ business to the firm.

The non-compete agreement prohibited her, for a period of three years following termination, from soliciting clients and engaging in competing business activities within the city of Stamford, Connecticut.  In exchange for these covenants, Ms. Wikstrom was to receive employment, $30,000 monthly payments to begin on January 1, 2010, and compensation for the sale of her former company’s good will and stock.

The merger of the two accounting firms did not go very well and Ms. Wikstrom left HBC in March 2002 due to dramatic differences in business personality and management style.  She proceeded to start her own accounting firm, the Wikstrom Group, located in Stamford that provided the same accounting services as HBC.  HBC interpreted these actions as clear violations of the non-compete agreement and sued Ms. Wikstrom in Connecticut state court for breach of the restrictive covenant.

The company specifically claimed that she had “actively and purposefully tried to induce her former clients to come with her to the new accounting practice she created, and otherwise attempted to hinder and damage the plaintiffs in their practice”.  Ms. Wikstrom however claimed that the agreement was unenforceable and that she did not violate any legally binding clauses contained in the purchase and employment agreements.

The Court’s Decision

The court ultimately denied HBC’s request for an injunction preventing further violations of the non-compete agreement and concluded that the agreement was in fact unenforceable.  It reached this decision based on several factors: 1) HBS had failed to demonstrate it was likely to succeed on the merits of the case and 2) the company failed to prove that it had incurred irreparable harm because of Ms. Wikstrom’s actions.  After examining the facts of the case and the provisions of the non-compete agreement, the court held that injunctive relief was inappropriate and HBC was not entitled to an injunction restraining Ms. Wikstrom’s business actions.

Reasonability and Enforceability of the Restrictions

The company was not able to meet the burden of proof required to demonstrate to the court that it was likely to succeed on the merits of the case.  Most notably, the court addressed the reasonability and enforceability of the restrictions contained in the restrictive covenant.  The geographical limitation was reasonable in scope but this was not true for the three-year time restriction.

This, according to the court, was unreasonable because Ms. Wikstrom had been practicing as a CPA for over thirty years, had many long-standing loyal clients, and needed income from her chosen profession to sustain herself.  The three-year period was too long, in the opinion of the court, and unnecessarily restricted her business actions and ability to pursue her occupation.

Furthermore, HBC did not demonstrate that it had incurred irreparable harm or that it was likely to do so in the future.  The only clients that left HBC were those that were clients of Wikstrom & Company prior to the merger of the two accounting firms.  The court noted that those clients would actually be harmed if an injunction was granted and held that its denial was the only way to maintain the status quo between the parties.

By denying the request for an injunction, the court permitted HBC and Ms. Wikstrom’s new company to carry on their business activities as they had been doing the previous eighteen months (since Ms. Wikstrom voluntarily terminated her employment with HBC).

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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.

When an Employee Refuses to Sign a Restrictive Covenant

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Restrictive Covenants

The concept behind restrictive covenants is simple – employees agree that for a reasonable period of time following the termination of employment with their employer, they will refrain from competing with that employer.  So long as the temporal and geographic restrictions are reasonable and so long as the restriction is not harmful to the employer or against public policy, restrictive covenants are generally enforceable.  But what happens when an employee refuses to sign a restrictive covenant? Can an employee be fired for failing to do so?

Courts, including Connecticut, are split as to this particular issue. One position taken by courts is that because the essence of at-will employment is the ability of an employer to fire an employee at any time, for any reason, an employer has the right to terminate an employee for refusal to sign a non-compete.  Conversely, some jurisdictions have held that employees who are terminated for refusing to sign a non-compete may maintain a wrongful termination cause of action against their employers.

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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.

Non-Compete Agreements in Connecticut Publication

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Maya Murphy published a 32-page booklet devoted exclusively to the subject of non-compete agreements in Connecticut.  The publication covers the origin of non-competes as creatures of contract, covering such areas as the consideration for the covenant not to compete and the required “meeting of the minds.” It then highlights termination of employment as well as the enforceability of a non-compete clause. The publication moves on to discuss Connecticut’s five-prong test for determining the reasonableness of a restrictive employment agreement, circumstances constituting breach as well as forms of relief, and judicial enforcement, including modification and “blue lining.”

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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.

Copyright © 2012 · Maya Murphy, P.C.

Enforcement of a Non-Compete Agreement in the Salon Industry

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Piscitelli v. Pepe, 2004 Conn. Super. LEXIS 3264
Case Background

Ms. Francine Piscitelli owned and operated a hairdressing and beauty salon since 1985.  She employed Ms. Bernadette Pepe as a stylist from 1990 to July 31, 2004.  The salon moved and underwent a change in its trade name in 1997.  Ms. Piscitelli had Ms. Pepe sign an Employment Agreement on February 27, 1997, that contained a restrictive non-compete covenant.

The non-compete agreement prohibited Ms. Pepe for one year following termination from engaging in competing business activities, soliciting the salon’s employees, or soliciting the salon’s current clients.  The agreement designated a restricted area for the covenant not to compete: Branford, North Branford, East Haven, Guilford, and the portion of New Haven east of the waterway formed by the Quinnipiac River, New Haven Harbor, and Morris Cove.

Ms. Pepe signed a three-year lease on March 9, 2002 for a premise in North Branford to operate a full-service hair and nail salon.  Ms. Piscitelli learned of this in May 2004, confronted Ms. Pepe about the development, and Ms. Pepe confirmed what her boss had been hearing around the salon.  Ms. Pepe assured her boss that she would not be soliciting any of the employees or any current clients beyond her own.  Ms. Piscitelli was comforted by these assurances and allowed Ms. Pepe to continue to schedule appointments at the salon until she voluntarily terminated her employment on July 31, 2004.

In the following months, three stylists left the salon to work for Ms. Pepe at La Bella salon and Ms. Pepe solicited clients of her previous salon regarding the opening of her own salon.

The Court Hearing and its Outcome

Ms. Piscitelli sued Ms. Pepe in Connecticut state court for breach of the non-compete agreement.  Ms. Pepe however contended that the agreement was unenforceable because it: 1) lacked adequate consideration, 2) contained unreasonable restrictions, and 3) there was an adequate remedy at law, thus barring injunctive relief as an appropriate legal solution.  The court rejected these defenses, found in favor of Ms. Piscitelli, and granted her request for enforcement of the covenant not to compete.

While the agreement did not increase Ms. Pepe’s compensation, paragraph ten created additional consideration because it obligated the employer, Ms. Piscitelli, to pay for “certain courses in professional education and training”.  This benefit, according to the court, was adequate consideration in exchange for Ms. Pepe’s covenants.

Furthermore, the court concluded that the covenant not to compete was reasonable with respect to the time and geographical limitations contained therein.  The restrictions did not unnecessarily restrict Ms. Pepe’s ability to earn a living or secure future employment within the salon industry.  The restriction adequately protected Ms. Piscitelli’s legitimate business interests while not excessively harming Ms. Pepe’s career opportunities.

Lastly, the court disagreed with Ms. Pepe that there was an adequate remedy at law available for the case.  The court held that Ms. Piscitelli met the burden of proof to show the need for an injunction and concluded that injunctive relief was appropriate for the case.

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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.

Industry Specific Factors Can Render Unenforceable a Covenant Not to Compete

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Case Background

A non-compete covenant may be unenforceable even if it is reasonable in terms of geographic designation and time limitation.  In Creative Dimensions, Inc. v. Laberge, 2012 Conn. Super. LEXIS 1464 (Conn. Super. May 31, 2012), two individuals sold their business and became “at will” employees of the purchaser.  At issue was a nationwide agreement not to compete for a period of 18 months following termination of their employment.  The court found the covenant reasonable in time and space but unenforceable nevertheless because of certain other factors, including attributes of the underlying industry.

The employer offered goods and services in the area of trade show signs, services, and exhibits.  The former employees joined a sign company that, as a result, expanded into the portable and custom exhibits market.  In deciding the case, the Court focused on two of the five factors relevant to determining the enforceability of a restrictive covenant: the extent to which it (a) protects legitimate business interests, and (b) unreasonably restricts an individual’s ability to engage in an occupation or profession.

Protections of the Non-Compete Covenant

Significantly, the defendants were the only employees of the plaintiff subject to a covenant not to compete.  The employer argued that it had invested time, energy, and money in the defendants as at will employees.  To this contention, the Court responded: “. . . an employer’s desire to stop competition from an employee in whom the employer has invested time, energy, and money is not sufficient, alone, to support the validity of a Covenant not to Compete or not to Solicit.

Equitably, the Covenant must protect against something more, and must be bargained for in exchange for more.”  Stated differently, a covenant not to compete must seek to protect against something more than mere competition, i.e., some advantage the employee acquired that would render unfair his immediate competition.

In this case, there was no evidence that the employer had trade secrets or confidential data that defendants accessed prior to their departure. By the same token, the employer’s customers were either already public knowledge or readily accessible through its own website.  The relationship between the employer and its customers was not markedly different from those of other portable display businesses.  In fact, the employer’s customers often used the services of the employer’s competitors, and the employer on occasion even outsourced business to its competitors. Significantly, the employer did not require other employees to sign a covenant not to compete even though employees had been lost to competitors in the past.

The Court’s Decision

As a result, the Court concluded that the employer did not truly believe that such covenants were necessary to protect itself within the portable display market.

The Court also found that the covenant seriously impeded defendants’ ability to pursue their chosen careers.  “The test for reasonableness is not whether the defendants would be able to make a living in other ways, or in other occupations, but whether or not the [covenant] as drafted and applied would unfairly restrain their “opportunity” to pursue their occupation.”

Finally, the Court emphasized that the portable display market “does not involve a fixed and unchanging clientele.”  The market is highly competitive, customer loyalty is fleeting, and sales staff are fairly transient.  In sum, while the defendants may have learned aspects of the trade show business while in the plaintiff’s employ, they were not provided with specialized or protected knowledge not readily available to others in the field.  Consequently, by virtue of their employ, defendants were not possessed of an unfair advantage in the market.

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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

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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.

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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.

Role of Consideration in a Connecticut Non-Compete Agreement

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J. M. Layton & Co. v. Millar, 2004 Conn. Super LEXIS 2226
Case Background

Mr. Reid Millar worked at J. M. Layton & Co., a Connecticut commercial insurance brokerage firm, for close to twenty years until he voluntarily terminated his employment on December 3, 2003.  During his career at Layton, Mr. Millar developed and maintained client relationships and the company even sent him to seminars in Florida on how to engender customer loyalty.  In January 1994, the company’s ownership transferred to an ‘Employee Stock Option Plan” scheme wherein Mr. Millar and the other employees became the new owners of the brokerage firm.  Mr. Millar signed an employment agreement later that year in August.

Mr. Millar signed this agreement in response to a memo from the company’s president stating, “The value of the stock in the company would increase when all employees/shareholders signed employment agreements”. The employment agreement contained non-compete and non-solicitation clauses prohibiting Mr. Millar from performing any service provided by Layton for a period of two years to any entity or person that was a client of Layton in the two years prior to termination.

Four years later, in 1998, the employee-owners sold the firm to SIG Acquisition Co. for $5.59 million.  Mr. Millar terminated his employment on December 3, 2003 and began to work for a competitor, Shoff Darby, soon after this decision.  Several clients made the switch with Mr. Millar and he provided them with services they previously received from Layton.  Layton sued Mr. Millar to enforce the terms of the restrictive covenant to which Mr. Millar presented a defense that there was not adequate consideration for the agreement to be enforceable.

The Court’s Decision

The court found in favor of Mr. Millar and held that the agreement between Layton and himself lacked the adequate consideration required to make the covenant legally binding on the signatory parties.  The court rejected Layton’s contentions that continued employment and increased value of stock in the firm were adequate forms of consideration for the agreement.

Consideration is a crucial contract law principle wherein each party must receive a benefit and/or a detriment from the agreement to make it legally valid and enforceable.  In the absence of consideration, an executory promise is generally unenforceable.  Courts have determined that continued employment alone is not adequate consideration for a restrictive covenant.  Past decisions have permitted it to qualify as adequate consideration when it accompanied by another defined benefit such as a change in compensation.

Likewise, the court held that the “increase in stock value” argument was without merit and did not constitute adequate consideration.  There was a timeline disconnect with the issuance of the stock, the employment agreement, and any increase in value that prevented adequate consideration in this form.  Mr. Millar received the stock seven months prior to signing the employment agreement and the increase in its value (if any) occurred four years after the agreement’s execution.

These components lacked a coherent connection that would unite them in a manner as to represent the adequate consideration needed to make the agreement enforceable.  The court concluded that the possible increase in stock value was far too “imprecise, indefinite, and self-serving, to be adequate consideration” and it denied Layton’s request for enforcement of the non-compete agreement.

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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.