White v. Fletcher/Mayo/Associates, Inc.

303 S.E.2d 746

 

RULE:

Where a trial judge is asked to determine the enforceability of a noncompetition covenant which the buyer of a business contends was given ancillary to the covenantor's relinquishment of his interest in the business to the buyer, and not given solely in return for the covenantor's continued employment, the judge must determine the covenantor's status. If it appears that his bargaining capacity was not significantly greater than that of a mere employee, then the covenant should be treated like a covenant ancillary to an employment contract, and as such, it should be enforced as written or not at all.

FACTS:

Appellant signed noncompetition agreements at the suggestion of the surviving company in a merger in hopes of securing broader career opportunities. After appellant was fired, he filed suit to determine whether he had to honor the agreements. The trial judge had edited the agreements extensively, declared them enforceable, and enjoined appellant from breaching them. Appellant sought review claiming that if he had refused to sign the agreements he would have been stigmatized, thereby jeopardizing his career prospects. The court reversed the judgment.

ISSUE:

Whether a covenant not to compete can be judicially rewritten so as to sever the objectionable portion(s)?

ANSWER:

No.

CONCLUSION:

The court stated that judicial editing was not proper in employment contract cases but was proper in sale of business cases. Where a trial judge is asked to determine the enforceability of a noncompetition covenant which the buyer of a business contends was given ancillary to the covenantor's relinquishment of his interest in the business to the buyer, and not given solely in return for the covenantor's continued employment, the judge must determine the covenantor's status. If it appears that his bargaining capacity was not significantly greater than that of a mere employee, then the covenant should be treated like a covenant ancillary to an employment contract. Although appellant had received payment for his stock at the time of the merger, appellant's bargaining capacity had not been significantly greater than that of a mere employee. Therefore, the court held the agreements were ancillary to an employment contract and should have been enforced as written or not at all.

Click here to view the full text case and earn your Daily Research Points.