To: Brenda Young, Supervising Attorney
From: Steven Carp , Legal Assistant
Date: September 26, 2012
Re: Enforcement of non-competition agreement against Brett Young
Whether the restrictive covenant is enforceable against Brett Young for working with a competitor of Finance R Us.
II. SHORT ANSWER:
No, the covenant is not enforceable against Brett Young for leaving Finance R Us and working for Titles Unlimited when the
III. STATEMENT OF FACTS
Brett Young worked for Finance R Us . His job was to search titles for clients wanting to buy a home. Before he started doing work for Finance R Us, he signed an employment contract with them , part of which contained the following language: “in the event this agreement is terminated, either voluntarily, involuntarily or by mutual consent, that Brett will not engage in a similar or competitive business for himself or for any competitor or in any capacity for any competitor in the state of Maryland for a period of five (5) years from the date this Agreement is terminated in any manner.” Brett received his assignments from the customer service department. He had no contact with customers as any part of his job. After two years of working for Finance R Us, he received a job offer to do the same type of work at Titles Unlimited. He would again, have no contact with customers and receive his assignments from the customer service department. Finance R Us sues Brett for breach of contract due to violating the restrictive covenant in the employment contract. IV. APPLICABLE LAW:
Budget Rent A Car v. Raab, 302 A. 2d 11 (Md.1973)
Ruhl v. Barlett Tree Co., 225 A. 2d 288 (Md. 1966)
Millward v. Gerstung International Sport Education Inc., 302 A 2d. 14 ( Md.1972)
V. DISCUSSION AND ANALYSIS:
The general rule in Maryland is that restrictive covenants in a contract of employment by which an employee agrees not to engage in any competing business upon leaving employment will be sustained if the employer can prove that the restraint is confined within the limits which are no wider as to area and duration than that are reasonably necessary for the protection of the business of the employer, and do not impose undue hardship on the employee or disregard the public interests. The protection of the business interest include the protection of trade secrets, methods, and possibly the access to existing customers. The courts have observed, the first logical step in reviewing a restrictive covenant is to consider whether the employer has any legally protectable interest in the agreement because if not, no amount of restriction can be permitted. The second step is to determine is there are any extenuating circumstances such as the language in the covenant is overly broad.
a.Legally protectable interest
In Ruhl, the former employee had taken up a significant portion of the employers customers, rendering him with a hardship as this was his only business that he (employer) was trained in. This is not the case here where Finance R Us did not allow Brett to have contact with the customers, so there was no unfairness to competition seeing that Brett would have to obtain his own customers by his own efforts. The interests the courts look to protect are those that make a business unique or would cause it to suffer unfairly if the covenant were not enforced. In the new position offered to Brett by Titles Unlimited, he would likewise also have no direct contact with customers, and could in no way personally substantially affect the business of Finance R Us. In Ruhl , the court acknowledge that such an enforceable determining factor could be one where a danger of monopoly is present. Nothing like this exists this case. There are no legally protectable interest that the former employer has that he would need to protect against Brett’s actions. To enforce a restrictive...