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Am. Sec. Servs., Inc. v. Vodra - 222 Neb. 480, 385 N.W.2d 73 (1986)

Rule:

There are three general requirements for a valid, partial restraint of trade such as a postemployment covenant not to compete, namely: first, is the restriction reasonable in the sense that it is not injurious to the public; second, is the restriction reasonable in the sense that it is no greater than is reasonably necessary to protect the employer in some legitimate interest; and, third, is the restriction reasonable in the sense that it is not unduly harsh and oppressive on the employee.

Facts:

Appellant American Security Services, Inc. wasa Nebraska corporation was engaged in the business of providing commercial security services. Pursuant to condition of employment, appellee Robert W. Vodra was an employee, who had signed a noncompetition agreement that restricted Vodra from soliciting business from customers of American Security for a period of three years after termination of employment. After appellee Vodra terminated employment with appellant American Security, Vodra immediately entered into a contract to provide security services for a current customer of appellant. Seeking an injunction, Appellant American Secuirty filed suit requesting an accounting against appellee Vodra for violating the restrictive covenant.  The District Court for Douglas County (Nebraska) denied the request for an injunction against appellee Vodra for violation of the noncompetition agreement as unreasonable and unenforceable. Appellant American Security filed an appeal contending the restrictive covenant was reasonable.

Issue:

Was the postemployment covenant not to compete unenforceable?

Answer:

No

Conclusion:

The appellate court reversed and remanded the case because the restriction imposed upon appellee by the restrictive covenant was not unduly harsh and oppressive and therefore, reasonable. The court applied a balancing test to determine that protection of appellant's goodwill outweighed any hardship imposed on appellee. The covenant not to compete prohibited Vodra's soliciting American's customers contacted in the combined circumstances, conditions, or situations specified in that covenant. Such restriction on Vodra, as a former employee of American, provides minimal restraint on competition and is reasonable. The covenant's time restriction is also valid because, given an applicable customer or former customer, American has a legitimate interest in protecting its customer good will for a reasonable period of time. Under the circumstances a 3-year restriction was reasonable to protect American's significant good will with its racetrack customers. Applying the balancing test to the present case, protection of American Security's good will outweighs any hardship which enforcement of the covenant may have on Vodra. Vodra had no training nor experience in security service before his employment with American. Any knowledge acquired by Vodra concerning security work was gained through on-the-job training as an American Security employee.

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