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An employer has a legitimate business interest to justify enforcement of a covenant not to compete where the customer relationships are near-permanent and but for the employee's association with the employer the employee does not have contact with the customers; and where the former employee acquires trade secrets or other confidential information through his employment and subsequently tries to use it for his own benefit.
Defendant, hired as labor staffing consultant for plaintiff's temporary industrial staffing and employment service, signed, as condition of employment, an employment agreement containing confidentiality and non-compete clauses that would remain in effect one year after termination. Defendant resigned and immediately opened his own staffing company. Plaintiff's preliminary injunctive relief based on defendant's employment agreement breach was granted. Defendant appealed, contending restrictive covenants were unenforceable and district court abused its discretion in granting relief.
Were the restrictive covenants enforceable, thereby justifying the grant of preliminary injunction in favor of the plaintiff?
The court applied the near-permanent relationship test and found the nature of plaintiff's business, its unique product, and its customer loyalty, created a near-permanent relationship with customers and, but for defendant's association with plaintiff, he would not have had acquired plaintiff's customers. The court affirmed, holding that, based upon the record evidence, the district court did not abuse its discretion in entering preliminary injunction order or in finding that the restrictive covenants were enforceable.