Posts tagged with "unreasonable restrictions"

Applying Basic Contract Principles to the Enforcement of Non-Compete Agreements

Applying Basic Contract Principles to the Enforcement of Non-Compete Agreements

North American Outdoor Products, Inc. v. Dawson, 2004 Conn. Super. LEXIS 2677

North American Outdoor Products, Inc. (NAOP) was a company created to facilitate sales of outdoor goods to mass retail merchants. The company marketed products such as instant garages, sporting goods, shelters, and canopies. Mr. Curt Dawson worked for NAOP in its sales and marketing department from February 1999 to April 2, 2004. He worked as the National Sales Manager for a period of time in Florida but returned to work in Connecticut when NAOP agreed in a January 2003 meeting to an annual raise of $25,000.00 and related moving expenses.
In March 2003, management requested that Mr. Dawson sign an Employee Agreement that contained and explained several restrictive covenants that would become effective upon termination. The agreement prohibited him from competing with NAOP for twelve months following termination as well as soliciting any entity that NAOP had transacted with in the three-year period prior to termination. Mr. Dawson signed and returned the employment and non-compete agreement on March 26, 2003 but a representative for the company did not sign the document at that time. A representative for NAOP only signed the document on March 20, 2004 when the company learned of Mr. Dawson’s intent to voluntarily terminate his employment.
NAOP brought legal action against Mr. Dawson and sought an injunctive order from the court to enforce the provisions of the non-compete agreement. Mr. Dawson however presented multiple defenses as to why the restrictive covenants were unenforceable: 1) lack of consideration, 2) unreasonable time and geographical restrictions, 3) unclean hands on the part of NAOP, and 4) lack of necessary signatures. The court found in favor of Mr. Dawson, held that the non-compete agreement was unenforceable, and denied NAOP’s request for injunctive relief.
Under Connecticut law, a non-compete agreement must have sufficient consideration to make the document legally binding upon the parties. For enforcement of a restrictive covenant, the employee must receive something in exchange for his or her covenant. The agreement at hand did not bestow any new benefit upon Mr. Dawson and stated that his continued employment was the consideration for the agreement. Connecticut courts have concluded however that “continued employment is not [sufficient] consideration for a covenant not to compete entered into after the beginning of the employment”. NAOP claimed that the raise and moving expenses promised in January 2003 demonstrated adequate consideration but the court rejected this notion because those promises bore no substantial connection to the written agreement from March 2003.
Furthermore, the court concluded that the covenant not to complete was unenforceable because of inherent ambiguities in its language. Courts cannot create a binding contract in the absence of a meeting of the minds between the parties. The plaintiff, in this case NAOP, bears the burden of proof with respect to demonstrating a meeting of the minds in order to prove its version/interpretation of the alleged contract. The court looked to the plain language of the agreement to ascertain whether it articulated clear and concise provisions that led to a meeting of the minds between Mr. Dawson and NAOP. The court concluded that the agreement was unclear about material details, namely the effective date of the provisions and the identification of the specific parties. The agreement was a bilateral document that required signatures of both parties in order to be complete and become legally binding. The absence of NAOP’s signature at the same time as Mr. Dawson’s thus rendered the agreement unenforceable.
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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Enforcement of a Non-Compete Agreement in the Salon Industry

Enforcement of a Non-Compete Agreement in the Salon Industry
Piscitelli v. Pepe, 2004 Conn. Super. LEXIS 3264

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 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 the work for Ms. Pepe at La Bella salon and Ms. Pepe solicited clients of her previous salon regarding the opening of her own salon.
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.
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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