Ecology Servs. v. Clym Envtl. Servs., LLC - 181 Md. App. 1, 952 A.2d 999 (2008)

Rule:

In Maryland, covenants not to compete may be applied and enforced generally only against those employees who provide unique services, or to prevent the future misuse of trade secrets, routes or lists of clients, or solicitation of customers. The general rule in Maryland is that if a restrictive covenant in an employment contract is supported by adequate consideration and is ancillary to the employment contract, an employee's agreement not to compete with his employer upon leaving the employment will be upheld if the restraint is confined within limits which are no wider as to area and duration than are reasonably necessary for the protection of the business of the employer and do not impose undue hardship on the employee or disregard the interests of the public. While such restrictions may be enforced under some circumstances, there is no sure measuring device designed to calculate when they are. Rather, a determination must be made based on the scope of each particular covenant itself; and, if that is not too broad on its face, the facts and circumstances of each case must be examined. 

Facts:

This case arose from a complaint filed by Ecology Services, Inc., appellant, in the Circuit Court for Frederick County against Robert Volkert, Kenneth Eubanks, Jerriel Neloms, and Osborne Raymond, all former employees of Ecology, and Clym Environmental Services, LLC ("Clym"), appellees. In the complaint, Ecology alleged that Clym's employment of appellees Volkert, Eubanks, Neloms, and Raymond at the campus of the National Institutes of Health (NIH) in Bethesda, Maryland, violated covenants not to compete that the appellee-employees had executed during their prior employment with Ecology. Based upon these covenants not to compete, Ecology requested that appellees Volkert, Eubanks, Neloms, and Raymond be enjoined from working for Clym at the NIH. Appellees filed a motion for summary judgment, which the circuit court granted. On appeal, Ecology Services raised the following issues: (1) whether the circuit court erred by resolving factual disputes against appellant when it granted appellees' motion for summary judgment; (2) whether the circuit court erred by failing to apply principles of Maryland law regarding enforceability of covenants not to compete; and (3) whether the circuit court erred when it held appellant did not have a protectable interest in the confidentiality of trade secrets, unique skills of the appellee-employees, and personal relationships between the appellee-employees and the NIH. 

Issue:

Were the covenants not to compete in this case enforceable?

Answer:

No.

Conclusion:

The appellate court held that the four employees were employed by Ecology when a government agency awarded two contracts to the competitor. It was inferred that job descriptions were part of the bidding process, but not that specific employees were. The skills and experience that the employees obtained during their employment with Ecology made them more efficient competitors when they went to work for the competitor. Ecology did not benefit from the personal contacts between the employees and the agency. Ecology’s business success on the contracts was attributable to price and its performance; there was no opportunity for exploitation of contacts with the employees. The employees did not have access to trade secrets. The employees were unskilled workers whose services were not unique. There was a fact issue as to whether the employees could have remained employed by the employer, which was resolved in Ecology’s favor as to all but employee one. Enforcement of the covenants would impose undue hardships on the employees. Invalidating the covenants also served the public interest. The non-competition covenants were unreasonable and unenforceable.