Durham v. Stand-By Labor of Georgia, Inc.

• Decision Date: 10 May 1973
• Docket Number: STAND-BY,No. 27813,27813
• Citation: 198 S.E.2d 145,230 Ga. 558
• Parties: , 1973-1 Trade Cases P 74,527 Francis L. DURHAM v.LABOR OF GEORGIA, INC.
• Court: Georgia Supreme Court

Page 145

198 S.E.2d 145

230 Ga. 558, 1973-1 Trade Cases P 74,527

Francis L. DURHAM v. STAND-BY LABOR OF GEORGIA, INC.

No. 27813.

Supreme Court of Georgia.

May 10, 1973.

Syllabus by the Court

1. The general noncompetition provision of the contract of employment in proscribing post-employment competitive activity on the part of the employee 'within a radius of 50 miles of any city in which Stand-By Services, Inc., or any affiliated company is operating at the time . . . employment is terminated,' is unreasonably broad and therefore void as in restraint of trade. No claim may be maintained pursuant to it.

2. The specific nondisclosure provision of the contract of employment is not void as a matter of law. Its reasonableness must be established on the basis of the legitimacy of the business need to protect the information sought to be protected-here, customer lists, information and personnel data. Given the proper factual basis establishing such reasonableness, a claim for relief may be maintained for its breach.

This is an action to enforce restrictive covenants in a contract of employment and for damages. The appeal seeks to test the legal sufficiency of the complaint on the ground that no claim was stated upon which relief could be granted. The trial court determined a claim had been stated and certified its order for review.

In its complaint, Stand-By Labor of Georgia prayed for injunctive relief and damages for alleged violations of post-employment restrictions in a contract with its former employee, Francis L. Durham. Paragraph Eleven, a general noncompetition provision, provided that upon termination of employment, for a period of one year, the employee would not engage in any competitive activity with Stand-By Labor '(a) within a radius of 50 miles of Atlanta, Georgia,' and '(b) within a radius of 50 miles of any city in which Stand-By Services, Inc., or any affiliated company is operating at the time . . . employment is terminated.' Clauses (a) and (b) were made distinct and severable. Paragraph Twelve, the other post-employment provision, provided in material part that for a period of one year after termination the employee would not 'for yourself or any other person or company, divulge the name and/or address of any information whatsoever concerning any customer or employee of Stand-By Services, Inc.' without consent of the company. Such confidential information was made to include Stand-By Labor's methods of doing business.

In Counts I and II of the complaint Stand-By Labor asked for injunctive relief and damages growing out of the alleged breach of contract. In Count III it asked for damages, actual and punitive, as a result of wilful tort growing out of such breach. The material allegations as to Counts I and II were to the effect that the defendant, Durham, had become employed by a competitor within a radius of 50 miles of Atlanta, Georgia, within the restricted time period of one year and had 'actively solicited, diverted, and attempted to take away customers and personnel' of Stand-By Labor and to provide such services to the customers as had been previously provided by the defendant while still in the employ of Stand-By Labor. The material allegations as to Count III were that the defendant had acted wilfully and wantonly in offering his services to a competing concern and in soliciting and diverting Stand-By Labor's customers and personnel and that such conduct in breach of contract constituted a wrongful tortious interference with the business of Stand-By Labor.

Nick G. Lambros, Atlanta, for appellant.

Haas, Holland, Levison & Gibert, Richard N. Hubert, Atlanta, for appellee.

HAWES, Justice.

1. The appellee, Stand-By Labor of Georgia, has moved this court to dismiss the appeal upon the grand the appellant has failed to file his Enumeration of Errors within the time allowed by Rule 14(a) of the Rules of the Supreme Court, and upon the ground that the trial court's certified order overruling the motion to dismiss for failure to state a claim, being one not involving the grant or denial of equitable relief, is not such an order from which an appeal would lie to this court. As we have held on previous occasions, Rule 14(a) is directory and its violation does not constitute one of the limited grounds for dismissal as prescribed by the Appellate Practice Act, Code Ann. § 6-809. In addition, because substantial equitable relief was sought by Stand-By Labor against the defendant Durham by way of injunction, the present appeal from an order overruling a motion to dismiss for failure to state a claim with proper certification will lie to this court and not to the Court of Appeals. Cp. Brown v. Wood, 227 Ga. 548, 181 S.E.2d 860 (1971). It follows, therefore, that the motion to dismiss the appeal is denied.

2. The contractual restraints in suit are those tending to lessen competition and are to be considered in the light of public policy disfavoring agreements having that effect. Code Ann. §§ 2-2701, Const. art. IV, § IV, par. 1, and 20-504. Under the law of Georgia, covenants in restraint of trade may be enforced if they are reasonable as to time and place and are not overly broad as to the activities proscribed, taking into consideration the interests of individuals in gaining and pursuing a livelihood, of commercial concerns in protecting property, confidential information and relationships, good will and economic advantage, and of the broader public policy favoring individual freedom to enter into contracts and to contract as one will. Shirk v. Loftis Brothers, 148 Ga. 500, 97 S.E. 66 (1918); Rakestraw v. Lanier, 104 Ga. 188, 30 S.E. 735 (1898). In all cases involving covenants not to compete, whether in sales of businesses or covenants ancillary to employment contracts, the rule of reason prevails: '(I)f, considered with reference to the situation, business, and objects of the parties, and in the light of all the surrounding circumstances . . . the restraint contracted for appears to have been for a just and honest purpose, for the protection of the legitimate interests of the party in whose favor it is imposed, reasonable as between them, and not specially injurious to the public, the restraint will be held valid.' Rakestraw v. Lanier, 104 Ga. 188, 195, 30 S.E. 735, supra. See Restatement of Contracts, §§ 513-515 (1932), and cp. Blake, Employee Agreements Not to Compete, 73 Harv.L.Rev. 625, 648 (1960).

(a) The general noncompetition provision. Paragraph Eleven of the present contract of employment provided as part of its general noncompetition terms that the defendant Durham would not enter into any competitive activity 'within a radius of 50 miles of any city in which Stand-By Services, Inc., or any affiliated company is operating at the time . . . employment is terminated.' As we have indicated in prior decisions, Ellison v. Labor Pool of America, 228 Ga. 147, 184 S.E.2d 572 (1971); Taylor Freezer Sales Co. v. Sweden Freezer & Corp., 224 Ga. 160, 160 S.E.2d 356 (1968), and, WAKE Broadcasters v. Crawford, 215 Ga. 862, 114 S.E.2d 26 (1960), such terms are overly broad and unreasonably in restraint of trade due to the chilling effect that may be had upon post-employment competitive activity because of the employee's inability to forecast with certainty the territorial extent of the duty owing the former employer. In Rita Personnel Services, Int., Inc. v. Kot, 229 Ga. 314, 191 S.E.2d 79 (1972), this court declined to apply the 'Blue-pencil theory of severability' in such circumstances and to sever the unenforceable clauses of the contract in view of policy considerations militating against the adoption of this theory. In Rita, this result was reached despite a specific contractual provision that its illegal clauses were severable.

Taking Paragraph Eleven of the contract as a whole, therefore, and in the face of a specific severability clause, the territorial limitations being overly...