National Recruiters, Inc. v. Cashman

• Decision Date: 27 August 1982
• Docket Number: No. 81-241.,81-241.
• Citation: National Recruiters, Inc. v. Cashman, 323 N.W.2d 736 (Minn. 1982)
• Parties: NATIONAL RECRUITERS, INC., Respondent, v. Daniel "Marty" CASHMAN, et al., Appellants.
• Court: Minnesota Supreme Court

323 N.W.2d 736 (1982)

NATIONAL RECRUITERS, INC., Respondent, v.Daniel "Marty" CASHMAN, et al., Appellants.

No. 81-241.

Supreme Court of Minnesota.

August 27, 1982.

Smith, Juster, Feikema, Malmon & Haskvitz and J. Christopher Cuneo, Minneapolis, for appellants.

Miller & Boeder and Brian H. Miller, Minneapolis, for respondent.

Considered and decided by the court en banc without oral argument.

WAHL, Justice.

This appeal involves four cases consolidated for trial in Hennepin County District Court.RespondentNational Recruiters, Inc.(National) sought damages and an injunction to enforce a restrictive covenant against appellants, four of its former employees.National also brought actions against Career Resources, Inc.; Career Resources' president, Micah Garber; and Corporate Resources, Inc., for tortious interference with contractual relations between National and its employees.Appellant employees counterclaimed for their vested interests in National's profit-sharing plan and trust, and appellant Cashman counterclaimed for defamation of his business, trade and professional reputation.The trial court found the restrictive covenant valid and awarded National liquidated damages, denied National's claim of tortious interference, granted appellants' counterclaims for their vested interests in the profit-sharing plan and denied Cashman's defamation claim.We affirm in part, reverse in part, and remand for further proceedings.

National is an employment agency owned and managed by Arnold Stern.It hires recruiters who are responsible for finding applicants and filling orders from companies that are looking for employees.The recruiters work in one of four areas of specialization, making phone contact with personnel people at various companies and gathering information about available jobs.National does not have exclusive agreements with either the applicants or the companies from which it seeks job orders.Much of the information handled by the recruiters is public and readily accessible.

Appellants Bujold, Strong, Cashman and Holtzman were all employed as recruiters for National.Each had prior sales experience, and each had been unemployed for a period of time before beginning with National.Strong, Cashman and Holtzman were 51, 50 and 45 years of age respectively and were highly experienced.During the employment interview, each appellant was told of the compensation he would receive by way of commissions and bonuses and of National's pension plan.None was told that he would be required to sign a noncompetition agreement.

Appellants were told to report to work on Monday morning.After coming to work, they were told they would have 2 days to prepare for a State Licensing Examination which they took the following Wednesday.Thereafter, each was presented with a noncompetition agreement and told that he must sign the agreement in order to work for National.Bujold was given the contract sometime after he had taken the examination, Cashman and Holtzman were given the contract on Friday of their first week, and Strong was shown the contract 1 week after starting work.Each signed the noncompetition provision under protest.

The noncompetition covenant consisted of an agreement not to compete for a period of 1 year within 50 miles of the Minneapolis office of National or the Minneapolis Courthouse.It provided that, upon violation of the covenant, National could seek injunctive relief to prevent further competition and could obtain liquidated damages equal to an "agreed value" for the training received.For Bujold, Holtzman and Strong, this amount was $2,500.For Cashman, this was $5,000 for the training, plus an additional $10,000 as "liquidated damages."The contracts also provided for an additional payment in the event a former employee became associated as "owner, operator, partner, officer, principal, shareholder, manager, departmental supervisor or in any other equity position in an employment agency" within 1 year after leaving National.(Emphasis in original.)The Bujold, Holtzman and Strong contracts provided for $15,000 payments and the Cashman contract for a $50,000 payment in the event of a breach of this clause.

All four appellants went to work at other employment-recruitment agencies after leaving National.Bujold, who was fired in July 1978, and Strong, who left National in 1980, went to Corporate Resources, Inc., one of the defendants in the court below.After being fired by Stern, Cashman went to Career Resources, Inc., another of the defendants in this case.Holtzman left National in January 1980 and began work in April of that year at another employment agency which he later purchased.

Bujold made three placements between 6 months and 1 year after leaving National, two of which grossed fees in the amounts of $4,300 and $2,800.Strong made one placement generating a $3,440 fee after leaving National.Cashman made two placements after termination of his employment with National, one for $4,000 and another for $7,500.Holtzman was the most successful of the appellants, making two placements within the 6 months following termination, and several placements thereafter.

Stern drafted the noncompetition agreement to prevent employees from setting up a business and placing applicants whose names they had obtained while employed at National.The agreement had been modified over the years to protect against any competition that would be damaging to Stern's firm's business.National sued each of the appellants for violating terms of the noncompetition agreement and, in addition, refused to pay appellants their vested interests in National's profit-sharing plan because of the alleged breach.National contended at trial that it could suffer damages in several ways: (1) if a former employee were to make placements at a firm National also contacts, (2) if a former employee were getting job orders from a company National also contacts, or (3) if a former employee were to deal with an applicant with whom National also dealt.In the first instance, the damages would be the net profit National would have earned by making the placement; in the second and third instances, damages would be more difficult to determine.

In the course of working as employment recruiters at their new firms, appellants had occasion to call many of the same companies they had called while searching for job openings at National.However, they did not try to imply to these companies that they still worked for National and, with one exception, did not keep in contact with applicants with whom they had worked at National.The exception involved an applicant with whom Cashman had dealt.Cashman stopped dealing with the applicant and with the company that had the job opening after Stern complained to Cashman's superior.

While working for National, recruiters worked with several different forms that Stern had developed over the years.These included referral notices, acceptance letters and job-order forms.They also had access to lists of companies that had provided job orders and maintained files on the peoplethey had contacted.Corporate Resources uses a referral notice and acceptance letter which are very similar to those used by National, but its job-order form is somewhat different.

In preparation for their licensing examination, National's recruiters read training materials and listened to tapes that Stern purchased several years earlier for approximately $400.The trial court found that this training was of little value.The useful training that the recruiters received was their on-the-job work contact with other recruiters and attendance at morning meetings.

The trial court weighed the evidence and decided that:

The legitimate needs of plaintiff, if any, are (1) for protection against employees taking applicants who are about to be placed with them when they leave plaintiff to go in competition with it; and (2) for protection against employees taking plaintiff\'s current files, lists, and job orders, or copies thereof, with them when they leave plaintiff to go in competition with it.

The...