Tommy Lasorda, the famous skipper of the Los Angeles Dodgers, said that managing a baseball team is like holding a dove in your hand — hold it too tightly and you kill it, but hold it too loosely and you lose it.
Something similar might be said of crafting a non-compete clause for employment contracts. Employers want it to have teeth, but if it’s drafted too tightly the courts will strike it down. For that reason, lawyers are careful to ensure that non-compete clauses are not too broad for the courts’ taste in either their time duration or geographic scope.
But one office supply company in Greenville had its non-compete clause struck down by the North Carolina Court of Appeals on Feb. 4 because it was too broad in terms of the range of jobs it precluded its ex-employees from taking—so broad, the court said, that they couldn’t even take on janitorial work.
In 2009, Joseph Musgrove took a job as a sales representative for CopyPro. As a condition of his employment, Musgrove signed a non-compete clause agreeing that for three years after the end of his time with CopyPro he would not “be employed or … be connected in any manner with any business of the type and character of the business engaged in by the Employer” within a territory covering much of eastern North Carolina.
During his tenure with CopyPro, Musgrove spent almost all his time with customers in two counties. In 2012, he left the company to take a job with Coastal Document Systems, a company that competed with CopyPro only in three different nearby counties. When CopyPro learned Musgrove was working for Coastal, it filed a complaint asking for an injunction. A Pitt County court sided with CopyPro and issued the injunction in December 2012.
But the Court of Appeals unanimously reversed that part of the lower court’s ruling, holding that CopyPro’s non-compete clause was not enforceable because it prohibited an unreasonably wide range of activities, a much broader array than was necessary to protect the company’s legitimate business interests.
The court said that, barring unusual factors, covenants restricting an employee from working in a capacity unrelated to the one in which he or she worked for the original employer are generally overbroad and unenforceable. It noted that the contract Musgrove signed was so broad, it would have even prevented him from working for Coastal as a janitor.
“Although Plaintiff would have clearly had the right to seek ‘to prohibit defendant from working in an identical position with a competing business,’ its decision to draft a much broader noncompetition agreement that prohibited Defendant from engaging in a wide array of activities which posed no competitive threat to Plaintiff” precluded the court from enforcing the agreement, Judge Sam Ervin wrote.
CopyPro had based its argument on the Court of Appeals’ 2002 decision in Precision Walls, Inc. v. Servie, but the court distinguished that case, noting that Musgrove did not have either the same level of responsibility or the same level of access to sensitive competitive information as the employee in Precision Walls.
Benton Toups and Susie Sewell of Cranfill Sumner & Hartzog LLP in Wilmington represented Musgrove. Toups said the case makes clear that employers have an interest in enforcing a restrictive covenant only insofar as it protects a legitimate business interest.
“That’s one of the overriding principles of the court’s view of non-compete clauses. … a business doesn’t have a legitimate interest in prohibiting an employee from working for a competitor in a non-competitive capacity,” Toups said.
David Fillippeli of White & Allen in Kinston represented CopyPro.
The 19-page decision is CopyPro, Inc. v. Musgrove (Lawyers Weekly No. 14-07-0105). The full text of the opinion is available online at nclawyersweekly.com.
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