ADP, LLC v. Olson

• Decision Date: 28 October 2020
• Docket Number: Civ. No. 20-03312 (KM) (JBC)
• Citation: ADP, LLC v. Olson, Civ. No. 20-03312 (KM) (JBC) (D. N.J. Oct 28, 2020)
• Parties: ADP, LLC, Plaintiff, v. JASON OLSON, Defendant.
• Court: U.S. District Court — District of New Jersey

ADP, LLC, Plaintiff, v. JASON OLSON, Defendant.

Civ. No. 20-03312 (KM) (JBC)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY

October 28, 2020

OPINION

KEVIN MCNULTY, U.S.D.J.:

DefendantJason Olson was a top-producing sales associate at PlaintiffADP, LLC.During his nineteen-year period of employment at ADP, Olson signed several restrictive covenants in which he agreed, in the event that he left ADP, not to (1) compete with the company, (2) disclose its confidential information, or (3) solicit its clients.In December 2019, Olson left ADP, allegedly because ADP investigators had discovered that he had been submitting fraudulent sales contracts in exchange for unearned commissions.It appears that Mr. Olson now works for Paycor, one of ADP's direct competitors.ADP considers this a violation of several provisions of the restrictive covenants and now moves this Court for entry of an order enjoining Olson from continuing to breach his non-compete obligations and from breaching the other restrictive covenant obligations owed to ADP.(DE 3).

For the reasons that follow, APD's motion is GRANTED, subject to certain limitations on the scope of the restrictive covenant as written.My decision, which does not depend on any disputed facts, is entered based on the briefs and affidavits, without an evidentiary hearing.

I.BACKGROUND¹

A. Olson's Employment

Olson worked at ADP for approximately nineteen years, in several positions.(Compl. ¶ 9.)He started as a district manager in ADP's Small Business Services Division in 2000, where he remained until March of 2015, when he was promoted to the position of Up Market District Manager in ADP's Major Accounts Services Division.(Id.¶¶ 9-10.)

After Olson joined ADP, the company provided him with specialized training which included general information about ADP products and services, as well as specialized information about his particular clients.(Id.¶ 23.)The training information included the strengths and weaknesses of ADP's products and services; the strengths and weaknesses of other ADP sales associates; the way ADP sells its products and services; the way ADP differentiates its products and services from its competitors; the relative advantages and disadvantages between ADP's products and services and those of its competitors; the methods by which ADP effectively competes with its competitors; ADP's pricing models and costs; ADP's planned improvements and expected new products; and complaints made by ADP customers.(Id.)This information is generally confidential to ADP, and ADP prohibits its disclosure or use by former employees.(Id.).During his time at ADP, Olson gained substantial access to such confidential information.(Id.¶ 17).He also had significant and direct contact with ADP's existing and prospective clients.(Id.).

During his time at ADP, Olson also had access to, and regularly used, ADP's confidential, proprietary, and trade secret information.(Id.).This information included ADP's confidential business methods; procedures,pricing, and marketing strategies; client information, including names, preferences, and needs; and information regarding the terms of client contracts.(Id.).ADP attempts to maintain the secrecy of this proprietary information by requiring employees to sign NDAs; limiting access to proprietary information on a need-to-know basis; requiring security and password protection on its work systems; and reminding and training its employees about the sensitive nature of this information.(Id.¶ 26.)

ADP alleges that Olson, in his position as Up Market District Manager, sold products to ADP clients along Florida's southeast coast, including Broward, Miami-Dade, Monroe, and Palm Beach Counties.(Id.¶ 11.)ADP claims that Olson's sales in that position came primarily from referrals he received from health insurance brokers located in that region.(Id.¶ 13.)ADP also alleges that from July 2018 to June 2019, Olson additionally served as a "hunter" in Broward County, where he was assigned a list of ADP prospects.(Id.¶ 15.)Finally, ADP alleges that Olson was assigned a list of 150 additional ADP customers in Broward and Palm Beach Counties, to which he was expected to sell additional ADP products and services.(Id.¶ 14.)

For his part, Olson admits that in July 2017, ADP assigned him to work as a "Broker District Manager - Healthcare" developing leads in Palm Beach, Broward, Miami-Dade, and Monroe Counties.(Opp.at 3.)He argues, however, that though he was assigned to those four counties, he"almost exclusively" worked in the southern half of Broward County.(Id.)Olson claims that he was reassigned in July 2019 to serve as a "Client Services Representative" in only Palm Beach County.This assertion is qualified by an admission later in his opposition that he serviced Palm Beach, Broward, Miami-Dade, and Monroe Counties as both a "hunter" in 2018 and as a client services representative in 2019.(Id. at 3-4.)

B.The Nondisclosure Agreement, Sales Representative Agreement, and Restrictive Covenant Agreement

As a part of his employment with ADP, Olson entered into a nondisclosure agreement ("NDA") and a sales representative's agreement ("SRA").(Compl. ¶¶ 17-18.)

The SRA includes non-solicitation, non-disclosure, non-use, and return of property provisions.The non-solicitation agreement applies for a year after the employee leaves ADP.(Id.¶ 18(a)).It prohibits contacting ADP clients or prospective clients to which the employee was exposed during his or her employment, if those clients are located within 75 miles of any territory the employee was assigned or any office where the employee worked.(Id.)

The SRA's non-disclosure agreement prohibits the disclosure of ADP information, including business methods, pricing and marketing structures, programs, forms, confidential information, trade secrets, client names or addresses, or "any other information relating to the ADP group learned by the Employee at any time during Employee's employment with the Company."(Id. 18(b).)It additionally requires that the employee return all ADP materials he may possess after his employment terminates.(Id.)

In addition to the SRA and NDA, which all ADP employees must sign, Olson signed a restrictive covenant agreement ("RCA").That agreement grants Olson access to a stock award program, which is only available to high-performing employees.(Id.¶ 19.)In exchange for access to the stock program, however, the RCA imposes greater non-solicitation and non-compete obligations on the employee.ADP reasons that these greater restrictions are necessary because high-performing sales associates have exceptionally strong relationships with ADP clients and possess more information about such clients than the typical employee, and thus pose a particular risk to ADP's client relationships and goodwill.(DE1-1 Exh. C ¶ 12.)Olson most recently entered an RCA on October 3, 2019.(Compl. ¶ 22.)

1.RCA Non-Solicitation

The 2019 RCA contains a non-solicitation provision that is more restrictive than the one found in the SRA.The RCA's provision prohibits employees, for one year after their departure from ADP, from soliciting or diverting any business from an ADP client whom (1) ADP provided services for in the two years, if Olson worked on the client; (2) ADP provided services for in the past year, if the client is located within Florida; (3) Olson solicited or contacted on ADP's behalf in the two years before he left the company; or (4) about whom Olson has any confidential information.(DE1-1 Exh. C. ¶ 5.a)Under the provision, ADP "clients" are defined to include any individuals or companies (1) to whom ADP provides products; (2) to whom ADP provided products within the one year period prior to Olson's termination of employment from ADP; (3) whom Olson solicited within the two years prior to Olson's termination of employment; or (4) as to whom Olson has any confidential information or trade secrets.(DE1-1 Exh. C. ¶ 1.c)

2.RCA Non-Compete

The RCA also contains a non-compete provision.It provides that, for one year after Olson leaves ADP, he may not work for a competing business anywhere within his prior territory if doing so would require him to provide the same or substantially similar services or use ADP confidential information.(DE1-1 Exh. C ¶ 4)Olson's "territory" is defined as the geographic area where he worked or represented ADP in the two years preceding leaving ADP, and "competing businesses" include any companies engaged in substantially the same busines as the sector of ADP that Olson worked in.(Id.)

3.Specific Provisions in the 2019 RCA

The 2019 RCA contains the following relevant provisions:

1. Definitions.

. . . .

d. "Competing Business" means any individual (including me), corporation, limited liability company,partnership, joint venture, association, or other entity, regardless of form, that is engaged in any business or enterprise that is the same as, or substantially the same as, that part of the Business of ADP in which I have worked or to which I have been exposed during my employment with ADP (regardless of whether I worked only for a particular segment of that part of the business in which I worked—for example, business segments based on the number of employees a Client has or a particular class of business using an ADP product or service).

. . . .

j. "Territory" means the geographic area where I worked, represented ADP, or had Material Business Contact with ADP's Clients in the two (2) year period preceding the termination of my employment with ADP.

. . . .

4. Non-Competition.I agree that during my employment and for a period of twelve (12) months from the voluntary or involuntary termination of my employment for any reason and with or without cause, I will not directly or indirectly, own, manage, operate, join, control, finance, be employed by or with, or participate in any manner with a Competing Business where doing so will

...