![if gte IE 9]><![endif]><![if gte IE 9]><![endif]><![if gte IE 9]><![endif]>
Thank You For Submiting Feedback!
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.
Plaintiff and defendant accounting firm entered into a written employment contract. As part of the agreement, plaintiff brought his present accounts to defendant firm and was paid a bonus for the accounts. Plaintiff received monthly bonuses until he terminated employment with defendant. Plaintiff filed suit against defendant seeking recovery of the balance due on his bonus. Defendant alleged that it did not owe the balance because plaintiff breached his restrictive covenant in the written employment contract. The restrictive covenant provided that the plaintiff may be considered as a competing accountant and bookkeeper if, after termination of the employment agreement, the plaintiff practices public or private accountancy or bookkeeping services within three years of the date of the termination and within thirty-five miles of the employer’s office. Both parties filed cross motions for summary judgment. The district court found the covenant not to compete unreasonable and unenforceable and judgment was entered for plaintiff. Defendant appealed, arguing that the district court erred as a matter of law in entering judgment for plaintiff because the covenant was reasonable and plaintiff forfeited his bonus.
Was the restrictive covenant reasonable, thereby making the decision of the district court an error as a matter of law?
The court affirmed judgment for plaintiff. The court held that the covenant not to compete was unenforceable because the covenant was broader than reasonably necessary to protect defendant's legitimate interest in customer goodwill.