Posts tagged with "restrictions"

Connecticut Court Uses Oral Agreement to Substantiate Consideration for Non-Compete Agreement

In Command Systems, Inc. v. Wilson, 1995 Conn. Super. LEXIS 406, Mr. Steven Wilson worked for Command Systems, Inc. where he received a promotion to the position of Vice President and Secretary of the company on June 26, 1990.  In September of that year, management informed Mr. Wilson that he would receive a bonus contingent on the company achieving certain sales goals.  The company did achieve the specified goals in December 1990 but the company informed Mr. Wilson that he needed to sign an agreement containing a contractual non-compete clause before he could receive the bonus.  The parties signed an agreement on December 21, 1990, that contained several restrictive covenants.  Mr. Wilson voluntarily terminated his employment with Command Systems a few years later and formed a new company, the Vertex Company.  The creation of the new company and Mr. Wilson’s actions are the basis of Command’s complaint regarding the breach of the December 1990 non-compete agreement.  Mr. Wilson requested summary judgment on the matter because the agreement lacked consideration and was therefore not legally binding on the parties.

The court had to answer the basic question of whether the 1990 agreement with the contractual restrictions was a valid and enforceable contract.  The court ultimately denied Mr. Wilson’s request for summary judgment and found that the agreement between the parties had adequate consideration and constituted an enforceable contract.  The agreement stated that the consideration for the agreement was “Wilson’s appointment as Secretary of Command”, but he had held this title for several months prior to the non-compete agreement.  The court recognized this but looked beyond this clause of the agreement to identify adequate consideration in relation to Mr. Wilson’s promotion.

The court looked to affidavits provided by Mr. Caputo, Command’s president, to find adequate consideration for the agreement.  The court did not find any factual holes in Mr. Caputo’s statements and had no reason to believe that they contained any misrepresentations, omissions, or lies.  The affidavits repeatedly referenced several conversations between Mr. Caputo and Mr. Wilson, especially an oral agreement wherein Mr. Wilson agreed to sign a non-competition restriction in exchange for being promoted to Secretary of the company.  Mr. Caputo stated, “The decision to make Wilson Secretary of the plaintiff corporation was based on his agreement to sign the contract of employment” in December 1990 that contained the restrictive covenants.  Command provided Mr. Wilson with the non-compete contract when he received the paperwork that officially named him Secretary, although the parties did not sign the agreement until several months later in December.  The contract contained language and clauses that highlighted that Mr. Wilson was being made Secretary of the company in exchange for the execution of an employment agreement restricting future employment activities.  The court used the information from Mr. Caputo’s affidavits to hold that there was an understanding between the parties at the time of Mr. Wilson’s promotion that it was contingent upon the execution of a non-compete agreement.  The court interpreted the oral agreement and the contract presented at the time of promotion as contemporaneous evidence that the non-compete agreement was in fact supported by adequate consideration.  Mr. Wilson failed to meet the requisite burden of proof in demonstrating that the agreement lacked consideration and the court denied his request for summary judgment.

If you have questions regarding non-compete agreements or any employment matter, contact Joseph Maya at 203-221-3100 or by email at JMaya@MayaLaw.com.

Non-Compete Enforceability: Must Protect Legitimate Interest & Not Be Punitive

Non-Compete Enforceability: Must Protect Legitimate & Not Be Punitive
Ranciato v. Nolan, 2002 Conn. Super. LEXIS 489

Historic Restoration and Appraisal, LLC (HRA) was engaged in the business of restoring primarily detached single-family homes that had suffered casualty damage from fire and/or water. The company employed Mr. Timothy Nolan to work as a project manager for jobs located throughout the state of Connecticut. Mr. Nolan’s employment began on November 18, 1996 and the company informed him shortly thereafter that his employment was contingent on the execution of a non-compete agreement. The parties signed the restrictive covenant on November 21, 1996 and it prohibited Mr. Nolan from performing the same services offered by HRA in the states of Connecticut, Massachusetts, and Rhode Island for a period of three years. The agreement did not affect Mr. Nolan’s ability to offer painting or home improvement services that were not in connection to fire and/or water damage. In exchange for this employment restriction, the agreement stipulated that Mr. Nolan’s annual salary would be $48,500. He felt that he would be fired if he failed to sign the agreement and signed it without consulting a legal professional.
HRA fired Mr. Nolan on January 24, 1997 after repeated incidents of discovering that he was receiving lewd and inappropriate materials via the company’s fax machine. He began to work for McGuire Associates shortly after HRA discharged him and performed marketing and business development services in the capacity of his new position. Unlike HRA, McGuire is a preferred builder and the court held that it did not compete with HRA. The company sued Mr. Nolan in Connecticut state court and asked the court to enforce the non-compete agreement that the parties had executed. The Superior Court of Connecticut in New Haven rejected HRA’s request and held that the company “suffered no financial loss as a result of the defendant’s employment by McGuire”.
According to the non-compete agreement, Mr. Nolan can be in breach only if he works at a company that is “in competition with” HRA. While the court acquiesced that HRA and McGuire were both in the construction industry, it held that they performed significantly different services and were not in competition with each other for clients or projects. The industry classified HRA as a “fire chaser” because it received most of its jobs by monitoring police reports and fire scanners to alert them of individuals that needed repairs for fire and/or water damage. McGuire however was a preferred builder and provided services for not only single-family homes, but also commercial and municipal buildings. The courts interpreted the significant differences between the two companies as adequate evidence that Mr. Nolan was not “in competition with” HRA because of his new employment with McGuire.
Furthermore, the court discussed the reasons why a court would enforce a non-compete covenant, specifically referencing the legal system’s desire to balance and protect the parties’ interests. Courts generally grant injunctions to enforce a non-compete agreement when the plaintiff employer can provide adequate evidence that the former employee’s breach will result in adverse financial consequences. The court noted that this policy did not apply to the case since HRA had not suffered any financial loss or hardship and Mr. Nolan did not have any access to confidential information that would be harmful to the company should it be disclosed.
Additionally, the court concluded that the time and geographical restrictions in the agreement were unreasonable given the facts of the case. HRA did not have anything to lose because of McGuire employing Mr. Nolan because of the differences in their business operations and the court held that the restrictions, if enforced, would only serve to prevent Mr. Nolan from employment at another company. The policy to enforce non-compete agreements focuses on protecting the interests of the employer and not to punish the employee and excessively restrict future employment opportunities. Specifically, the court cited that HRA could only “benefit from protection in the New Haven area” and that the “tri-state restriction imposed on the defendant was not necessary to protect any legitimate interests of the plaintiff and, therefore, [the agreement] was not ‘reasonably limited’”.
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.

Continue Reading

Non-Compete Enforceability: Must Protect Legitimate Interest & Not Be Punitive

Non-Compete Enforceability: Must Protect Legitimate & Not Be Punitive
Ranciato v. Nolan, 2002 Conn. Super. LEXIS 489

Historic Restoration and Appraisal, LLC (HRA) was engaged in the business of restoring primarily detached single-family homes that had suffered casualty damage from fire and/or water. The company employed Mr. Timothy Nolan to work as a project manager for jobs located throughout the state of Connecticut. Mr. Nolan’s employment began on November 18, 1996 and the company informed him shortly thereafter that his employment was contingent on the execution of a non-compete agreement. The parties signed the restrictive covenant on November 21, 1996 and it prohibited Mr. Nolan from performing the same services offered by HRA in the states of Connecticut, Massachusetts, and Rhode Island for a period of three years. The agreement did not affect Mr. Nolan’s ability to offer painting or home improvement services that were not in connection to fire and/or water damage. In exchange for this employment restriction, the agreement stipulated that Mr. Nolan’s annual salary would be $48,500. He felt that he would be fired if he failed to sign the agreement and signed it without consulting a legal professional.
HRA fired Mr. Nolan on January 24, 1997 after repeated incidents of discovering that he was receiving lewd and inappropriate materials via the company’s fax machine. He began to work for McGuire Associates shortly after HRA discharged him and performed marketing and business development services in the capacity of his new position. Unlike HRA, McGuire is a preferred builder and the court held that it did not compete with HRA. The company sued Mr. Nolan in Connecticut state court and asked the court to enforce the non-compete agreement that the parties had executed. The Superior Court of Connecticut in New Haven rejected HRA’s request and held that the company “suffered no financial loss as a result of the defendant’s employment by McGuire”.
According to the non-compete agreement, Mr. Nolan can be in breach only if he works at a company that is “in competition with” HRA. While the court acquiesced that HRA and McGuire were both in the construction industry, it held that they performed significantly different services and were not in competition with each other for clients or projects. The industry classified HRA as a “fire chaser” because it received most of its jobs by monitoring police reports and fire scanners to alert them of individuals that needed repairs for fire and/or water damage. McGuire however was a preferred builder and provided services for not only single-family homes, but also commercial and municipal buildings. The courts interpreted the significant differences between the two companies as adequate evidence that Mr. Nolan was not “in competition with” HRA because of his new employment with McGuire.
Furthermore, the court discussed the reasons why a court would enforce a non-compete covenant, specifically referencing the legal system’s desire to balance and protect the parties’ interests. Courts generally grant injunctions to enforce a non-compete agreement when the plaintiff employer can provide adequate evidence that the former employee’s breach will result in adverse financial consequences. The court noted that this policy did not apply to the case since HRA had not suffered any financial loss or hardship and Mr. Nolan did not have any access to confidential information that would be harmful to the company should it be disclosed.
Additionally, the court concluded that the time and geographical restrictions in the agreement were unreasonable given the facts of the case. HRA did not have anything to lose because of McGuire employing Mr. Nolan because of the differences in their business operations and the court held that the restrictions, if enforced, would only serve to prevent Mr. Nolan from employment at another company. The policy to enforce non-compete agreements focuses on protecting the interests of the employer and not to punish the employee and excessively restrict future employment opportunities. Specifically, the court cited that HRA could only “benefit from protection in the New Haven area” and that the “tri-state restriction imposed on the defendant was not necessary to protect any legitimate interests of the plaintiff and, therefore, [the agreement] was not ‘reasonably limited’”.
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.

Continue Reading

Constructive Discharge Does Not Invalidate Connecticut Non-Compete Agreements

Constructive Discharge Does Not Invalidate Connecticut Non-Compete Agreements
Drummond American LLC v. Share Corporation, 2009 U.S. Dist. LEXIS 105965

Ms. Martha Mahoney worked for Drummond American LLC, a company that sold commercial grade chemicals and hardware to governmental and industrial customers, as its Connecticut Sales Agent until August 2008. She was in charge of facilitating contact between the company and its customers. Drummond had her sign a covenant not to compete as a condition of her employment with the company. The non-compete agreement prohibited Ms. Mahoney from soliciting orders from or selling competitive products to any customers she solicited or sold to on Drummond’s behalf in the twelve months prior to termination. The agreement detailed that the restrictions applied for two years following Ms. Mahoney’s termination. Ms. Mahoney began to work for Share Corporation in August 2008. The company was a direct competitor with Drummond and had Ms. Mahoney sign an agreement stating that she would honor her non-compete with Drummond during her employment with Share. She contacted her previous Drummond customers however and sold Share’s products to twelve such customers.
Drummond sued Ms. Mahoney for breach of the restrictive covenant and asked the court to enforce the non-compete clauses. Ms. Mahoney did not deny that she breached the non-compete agreement but argued that she should not be held liable for her breach because the agreement was invalid. Her main contentions were that the agreement was unenforceable under the five-prong test as stated by the Connecticut Supreme Court in Scott v. Gen. Iron & Welding Co., 171 Conn. 132 (1976), and that her constructive discharge invalidated the agreement. The court ultimately rejected these defenses, found in favor of Drummond, and ordered the non-compete agreement enforced.
In Scott, the court held that a non-compete agreement’s reasonableness is evaluated based on five factors: 1) duration of the restrictions, 2) geographic area of the restrictions, 3) degree of protection afforded to the employer, 4) restrictions on employee’s ability to pursue a career, and 5) any interference with the public’s interests. Here, the court held that the agreement between Drummond and Ms. Mahoney did not violate any of these factors. An employer possesses a proprietary right to its customers and is entitled to protect this right for a reasonable period. The court held that a two-year period was reasonable and enforceable. Furthermore, the court found that the provisions of the agreement were not overly broad and did not unnecessarily restrict her ability to earn a living. The covenant only prevents her from soliciting and transacting with twenty-six customers, meaning that there were still thousands of potential clients not excluded under the agreement’s provisions.
The court likewise rejected Ms. Mahoney’s argument that Drummond constructively discharged her and this action invalidated the non-compete agreement. A constructive discharge is when the employer creates an intolerable work atmosphere that forces the employee to quit involuntarily instead of the employer directly terminating the individual’s employment. The court held that the nature of an employee’s termination is irrelevant in this respect and does not affect the validity of the agreement and its legally binding nature upon the parties.
All of Ms. Mahoney’s defenses failed under the court’s scrutiny and analysis of the case, rending her liable for her breach of 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.

Continue Reading

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

Court Enforces Non-Compete Agreement to Protect Employer’s Business Interests
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 covenant not to compete. 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).
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 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.
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.

Continue Reading

Courts Cannot Extend Expired Non-Compete Agreements Under Connecticut Law

Courts Cannot Extend Expired Non-Compete Agreements Under Connecticut Law
Aladdin Capital Holdings, LLC v. Donoyan, 2011 U.S. Dist. LEXIS 61095

Ms. Harumi Aoto Donoyan worked as a Senior Managing Director for Japan Sales and Marketing at Aladdin Capital Holdings, LLC, a boutique investment bank in Stamford, Connecticut. The firm promoted her to this position in 2008 contingent on executing a restrictive covenant wherein she promised not to complete with the firm following termination while she continued to receive compensation and other benefits from the firm. Aladdin terminated Ms. Donoyan in April 2010 with the agreement that she would receive her full salary and benefits through May 5, 2011. This arrangement made prohibitions in the non-compete effective until May 5, 2011 since the restrictions were applicable while she received benefits from the firm.
Aladdin alleged that Ms. Donoyan engaged in activities that amounted to competing with the firm while she was still receiving a salary and benefits. It filed a suit in federal court on April 25, 2011 and served Ms. Donoyan on April 28, 2011, ten and seven days respectively before the expiration of the restrictive covenant. The case reached the federal district court in June 2011, well after the non-compete agreement had expired. Aladdin asked the court to declare that Ms. Donoyan had breached the agreement and issue an injunction prohibiting any further violations. The court noted that the request for injunctive relief was moot since the time restriction had already expired.
The court did however analyze its authority as a court sitting in equity to extend the duration of a restrictive covenant as a remedy for a previous breach of a non-compete agreement. Restrictive covenants can have built-in provisions that extend the time restriction upon a breach by the former employee. This however, was not the case with the dispute before the court and the only way for the time restriction to be extended was for the court to unilaterally amend the agreement. While some states’ highest courts have held that the lower courts have “broad equitable power to extend even an expired restrictive covenant as a remedy for breach”, the federal court here did not see any evidence that the Connecticut Supreme Court held this legal stance. In light of this, the federal court held that it lacked the authority under Connecticut state law to extend an expired non-compete agreement. The federal court’s holding with regard to this issue was that “a request for injunctive relief based on a restrictive covenant becomes moot upon the expiration of the period specified in the parties’ restrictive covenant, unless the restrictive covenant contains language that expressly permits extension of the restrictive covenant”. Aladdin could have placed an automatic extension mechanism in its non-compete agreement but chose not to do so. Even though the court acknowledged that Ms. Donoyan had in fact breached the non-compete agreement, it ultimately denied Aladdin’s request to extend and enforce the restrictive covenant based on the fact it lacked the authority to do so under Connecticut law.
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.

Continue Reading

Court Modifies Geographical Restriction in order to Enforce a Non-Compete Contract

Court Modifies Geographical Restriction in order to Enforce a Non-Compete Contract
Eastcoast Guitar Center, Inc. v. Tedesco, 2000 Conn. Super. LEXIS 320

Eastcoast Guitar Center, Inc. was a company based in Danbury, CT and employed Mr. Richard Tedesco as a sales/customer service representative from 1997 to 1999. The company had Mr. Tedesco sign a non-compete contract on January 27, 1997 that prohibited him for one year following his termination from competing directly or indirectly with Eastcoast Guitar within a one hundred mile radius of the store’s location at 25 Hayestown Road, Danbury, CT. This provision created a protected/prohibited area that included the entire state of Connecticut and extended into portions of Massachusetts, New York, and Rhode Island. Eastcoast Guitar terminated Mr. Tedesco’s employment on August 16, 1999 and he began to operate his own company known as Guitar Hangar, an internet-based guitar sales company. Eastcoast Guitar sued Mr. Tedesco in Connecticut state court for violation of the non-compete contract and requested that the court issue an injunction to enforce the restrictions and prevent further violations of the covenant.
The court found in favor of Eastcoast Guitar and enforced the non-compete contract on a modified basis. In its analysis, the court applied the five-prong test to assess the enforceability of the non-compete contract as stated in Robert S. Weiss & Associates, Inc. Wiederlight, 208 Conn. 525 (1988). Specifically, the court looked at: 1) the scope of the time restriction, 2) the scope of the geographical restriction, 3) the protection afforded to the employer, 4) the restraint of the employee’s ability to obtain future employment, and lastly 5) the extent the agreement interfered with the public’s interest. All of these factors must be reasonable in order for a plaintiff to be entitled to injunctive relief in a legal dispute.
The court, after reviewing all the evidence and testimony, found that the agreement satisfied the factors with exception of the geographical restriction. It recognized that the company had a valid business interest that deserved protection and as such changed the geographical restriction from one hundred miles to thirty miles and ordered that the agreement be enforced. The one hundred mile radius was too broad and overreaching according to the court and it felt that its modification of the restriction to prohibit only Fairfield, Litchfield, and New Haven counties was reasonable and legally acceptable under Connecticut law.
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.

Continue Reading

Breach and Irreparable Harm Required for Enforcement of Non-Compete Agreement

Breach and Irreparable Harm Required for Enforcement of Non-Compete Agreement
Opticare, P.C. v. Zimmerman, 2008 Conn. Super. LEXIS 759

Opticare, P.C. was a company engaged in the business of offering optometry and ophthalmology services to patients. A sister company, Opticare Eye Health Centers, Inc. was created in 1995 to provide management services to Opticare, operate an ambulatory surgical center, and own/operate retail eye-wear stores. Opticare employed Dr. Neal Zimmerman as an ophthalmologist specializing in vitreoretinal surgery from April 1984 to November 10, 2006. He signed several employment agreements with Opticare during his time as an employee with the company and each one contained a non-compete clause that would become effective upon Dr. Zimmerman’s termination. The restrictive covenant stated that Dr. Zimmerman was prohibited for eighteen months after his termination from offering medical services at a competing company located with a restricted area that was a hexagon ranging from fifteen to thirty miles from where he practice his profession. The non-compete agreements also specified that Dr. Zimmerman was required to provide one year notice of voluntary termination if he intended to continue to practice medicine in the state of Connecticut.
On September 6, 2006, Dr. Zimmerman provided a sixty-day notice of voluntary termination to Opticare’s management and shortly thereafter, five other physicians tendered their resignation from the company. He began providing ophthalmological services on January 2, 2007 at a new office located in Prospect, Connecticut, a mere four miles from Opticare’s office in Waterbury and clearly within the prohibited area according to the non-compete agreement. He testified that approximately 50% of his current patients were former patients of Opticare, his former employer. Opticare sued Dr. Zimmerman for breach of the non-compete agreement and asked the court to grant injunctive relief by enforcing the restrictions enumerated in the agreement.
After weighing the evidence presented by the parties, the court held in favor of Dr. Zimmerman and concluded that the non-compete agreement was not enforceable. Dr. Zimmerman admitted he violated the agreement based on the face value of its terms but raised questions regarding the legality of the covenant and argued that he was not obligated to refrain from further activities at his new practice. The court weighed the evidence to evaluate whether Dr. Zimmerman’s breach of the agreement had any negative impact on Opticare’s business operations or that the company had incurred irreparable harm. It ultimately found that Opticare failed to present sufficient evidence to prove that it experienced either of these detriments and the court noted that Opticare was “still in business and there was no showing that the business is close to ruination or has been permanently harmed in any way”. Breach alone, according to the court, is insufficient to demonstrate that an injunction is necessary. A moving party must demonstrate breach and incurred or imminent irreparable harm in order to be successful with a request for injunctive relief.
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.

Continue Reading

Enforcing Non-Competes Associated with Sale of Company and Goodwill

Enforcing Non-Competes Associated with Sale of Company and Goodwill
Kim’s Hair Studio, LLC v. Rogers, 2005 Conn. Super. LEXIS 1805

Ms. Dorothy Rogers owned a hair salon in Higganum, Connecticut called Dotties Creative Cuts and entered into an agreement to sell the company’s “assets, goodwill, and client lists” to Kim’s Hair Studio, LLC for the amount of $20,000. This transaction essentially made Ms. Rogers a new employee of Kim’s hair Studio and as such, she was required to sign a non-compete agreement that prohibited her from offering competing services for twelve months after her termination within ten miles of 323 Saybrook Road, the primary work location of Kim’s Hair Studio. The parties executed non-compete and confidentiality agreements on August 23, 2004. Ms. Rogers did not like how the salon was being run by the company’s management and voluntarily terminated her employment in order to work at a new hair salon that was located a mere one-half mile away. Ms. Rogers additionally removed a rolodex containing Kim’s Hair Studio’s client information and began to contact them to solicit their business. Kim’s Hair Studio sued Ms. Rogers and requested that the court enforce the non-compete and confidentiality agreements.
The court granted the request for an injunction and ordered the enforcement of the agreements’ provisions. It concluded that the restrictions were reasonable in scope and that Ms. Rogers’ action had amounted to a breach of the covenant between the two parties. Kim’s Hair Studio had legitimate interests in executing non-compete agreements with its employees because its goodwill and client clients were essential assets that Kim’s Hair Studio invested resources in to acquire and maintain. The restrictive covenants were designed to prevent the loss or infringement of these assets and ensure that Kim’s Hair Studio was not negatively affected due to an employee’s termination, whether voluntary or involuntary in nature.
The court reasoned that a party is entitled to an injunction restraining further breach of a restrictive covenant when it demonstrates that the other party has or is very likely to breach the agreement. Additionally, the court noted Connecticut courts’ willingness to enforce a non-compete agreement when it is made in connection with the sale of a company and its goodwill. These legal principles, in conjunction with reasonable and limited restrictions, allowed the court to conclude that the non-compete agreement between Ms. Rogers and Kim’s Hair Studio was valid and enforceable under Connecticut law.
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.

Continue Reading

Both Parties Must Sign Non-Compete Agreement To Make It Legally Binding

Both Parties Must Sign Non-Compete Agreement To Make It Legally Binding
Fairfaxx Corp. v. Nickelson, 2000 Conn. Super. LEXIS 2340

Fairfaxx Corporation, a company based in Norwalk, Connecticut, employed Ms. Sarah Nickelson from January 1997 until she voluntarily terminated her employment on November 23, 1998. Fairfaxx provided services for full and part-time employees to clients located in Fairfield and New Haven counties in Connecticut in addition to Putnam and Westchester counties in New York. Ms. Nickelson first worked as a part-time receptionist for Fairfaxx at Aviator in Stratford, then as a temporary employee of Fairfaxx itself, and then hired on a permanent basis as a Personnel Consultant in May 1997. He did not have an employment contract and as such, she was classified as an employee at will. Seven months later, in December 1997, Fairfaxx’s employees, including Ms. Nickelson, were presented with a “Confidentiality and Non Compete Agreement”. There was an understanding that the employees would be terminated should they refuse to sign the restrictive covenant. Ms. Nickelson signed and returned the non-compete agreement on December 9, 1997. The covenant not to compete prohibited Ms. Nickelson from recruiting candidates or soliciting clients in New Haven, Fairfield, Putnam, and Westchester counties for two years following her termination.
Ms. Nickelson moved in November 1998 and was promptly contacted by a recruiter concerning a job at Premier Staffing Solutions, a company in direct competition with Fairfaxx. She was offered a position with Premier and accepted due to the shorter commute and higher commission rate. She ended her employment with Fairfaxx on November 23, 1998 and immediately began to work for Premier. Fairfaxx sued Ms. Nickelson in Connecticut state court for breach of the covenant not to compete and requested that the court enforce the restrictions contained therein. Ms. Nickelson argued that the non-compete agreement was not a valid employment agreement and she was not obligated to abide by its restrictions. The court ultimately found in favor of Ms. Nickelson, invalidated the non-compete agreement, and denied Fairfaxx’s request for injunctive relief.
The court came to this decision because the agreement lacked adequate consideration and the requisite signatures. The non-compete agreement spoke of “mutual promises” but the court concluded that Ms. Nickelson received nothing in exchange for her covenants. She had the same job, same salary, and same benefits after she signed the agreement as before its execution. She was promoted to Manager of the Temporary Division at Fairfaxx in January 1998 but the court found that this was not in any way connected to the non-compete agreement and held that this could not be construed as consideration for the covenants that Ms. Nickelson gave to the company.
Furthermore, the court found that the non-compete agreement was not legally binding because it was only signed by Ms. Nickelson. Fairfaxx noted that it clearly intended to sign the agreement and have its provisions become legally binding but did not actually know if someone from the company’s management had signed the covenant not to compete. The agreement was designed to be a bilateral contract and would not become legally binding until both parties had signed. The agreement contained signature blocks for Ms. Nickelson and Fairfaxx and required both in order for the restrictions/provisions to become effective.
In light of a missing requisite signature and inadequate consideration, the court held that the non-compete agreement was unenforceable and denied Fairfaxx’s request for injunctive relief.
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.

Continue Reading