Scott v. General Iron & Welding Co., Inc.

• Decision Date: 01 June 1976
• Citation: 171 Conn. 132,368 A.2d 111
• Court: Connecticut Supreme Court
• Parties: Roy T. SCOTT v. GENERAL IRON AND WELDING COMPANY, INC.

Page 111

368 A.2d 111

171 Conn. 132

Roy T. SCOTT v. GENERAL IRON AND WELDING COMPANY, INC.

Supreme Court of Connecticut.

June 1, 1976.

William F. Gallagher, New Haven, with whom, on the brief, was Joseph M. Delaney, Wallingford for appellant (plaintiff).

Alfred L. Fordiani, Jr., Meriden, for appellee (defendant).

Before HOUSE, C.J., and LOISELLE, BOGDANSKI, LONGO and BARBER, JJ.

LONGO, Associate Justice.

The plaintiff in this case brought an action for a declaratory judgment determining the validity of a restrictive covenant in an employment contract between the plaintiff and the defendant, his former employer. The court declared that the covenant was valid and enforceable and the plaintiff has appealed to this court from that judgment. In his assignment of errors, the plaintiff claims that one paragraph of the finding contains facts which were found without evidence. Because the defendant has included in its brief an appendix showing evidence on which the finding of these facts can be based, the paragraph will not be stricken from the finding. See Hames v. Hames, 163 Conn. 588, 591, 316 A.2d 379; Practice Book §§ 645, 721. Many assignments of error have been expressly abandoned by the plaintiff in his brief; the remaining claims of error are considered in the opinion.

The facts of this case, which appear in the finding and are not subject to correction, may be summarized as follows: The defendant, General Iron and Welding Company, Inc., has been located in Meriden for many years and is in the business of fabricating and welding metals. In 1958 or 1959, when the plaintiff, Roy T. Scott, entered the defendant's employ as an apprentice welder, he had no previous training or experience in the field. In the course of his employment by the defendant, the plaintiff advanced in status and in 1968 became manager of the defendant corporation. As such, he dealt directly with the defendant's customers. In 1971, the vice president of the defendant corporation met with the plaintiff to discuss his future with the corporation. They discussed the future benefits and opportunities which would accrue if the plaintiff were to assume the title of chief engineer, including access to design and engineering knowledge, freedom to handle the affairs of the corporation, and access to the defendant's customer list. As a result of the discussion, an agreement was submitted to the plaintiff for his approval. The plaintiff had conferred with his attorney, and, after certain changes were made, the plaintiff signed the revised agreement on April 6, 1971. At the time the agreement was signed the defendant had in excess of one thousand customers which had been acquired over a period of years and some eight of which were major customers. These customers were located throughout Connecticut and the defendant did business from time to time in not less than twenty-five nor more than seventy-five Connecticut towns. As of April 6, 1971, all of the customer lists became available to the plaintiff and he was introduced to the customers and called upon them himself to solicit business for the defendant. Shortly thereafter, a salary dispute between the plaintiff and defendant developed and could not be resolved; as a result, the plaintiff gave up his management position and continued to work for the defendant in a lesser capacity. On March 24, 1972, the plaintiff voluntarily left the defendant's employ. At the time of the trial, the plaintiff was employed by the Kiely Manufacturing Company as a welder, and he desired to participate in the management of that business.

The agreement between the plaintiff and defendant which was signed on April 6, 1971, contains the covenant which is the subject of this dispute. The agreement, in its essential provisions, prohibited the plaintiff from disclosing confidential information not generally known in the industry and acquired by him concerning the defendant's products, processes and services, research, inventions, manufacturing, purchasing, accounting, engineering, marketing, merchandising and selling; and from disclosing the list of the defendant's customers to any person or other entity. The agreement also was expressly intended to protect the confidential information and operations of the C. & S. Ball Bearing Machinery and Equipment Corporation of America, with which the defendant would be working closely; and all covenants in the agreement were to pertain to both the defendant and C. & S. The following paragraphs contained in the agreement are the gravamen of this action: '3. The Employee further agrees that for a period of five years after the termination of his employment with the Corporation he will not, within the State of Connecticut, directly or indirectly, own, manage, operate, control, act as agent for, participate in or be connected in any manner with the ownership, management, operation, or control of any business similar to the type of business conducted by the Corporation at the time of the termination of his employment. 4. It is agreed between the parties hereto, that this Agreement may be voided by their mutual consent in writing. It is understood that this Agreement is in no way intended to restrict the Employee, upon termination of his employment with the Corporation, from continuing to earn a living, as an employee, in his trade or specialty.' ¹

The finding of the trial court that the agreement was supported by adequate consideration is uncontested by the plaintiff. The plaintiff argues on this appeal that the court erred in concluding that the agreement was valid and binding, and in overruling his claims that the restrictive covenant in paragraph three was unreasonably restrictive as to area and time and that it was in restraint of trade.

In order to be valid and binding, a covenant which restricts the activities of an employee following the termination of his employment must be partial and restricted in its operation 'in respect either to time or place, . . . and must be reasonable-that is, it should afford only a fair protection to the interest of the party in whose favor it is made and must not be so large in its operation as to interfere with the interests of the public. Cook v. Johnson, 47 Conn. 175, 176; May v. Young, 125 Conn. 1, 5, 2 A.2d 385; Samuel Stores, Inc. v. Abrams, 94 Conn. 248, 253, 108 A. 541, 9 A.L.R. 1450.' Torrington Creamery, Inc. v. Davenport, 126 Conn. 515, 519-520, 12 A.2d 780, 783; see Oregon Steam Navigation Co. v. Winsor, 87 U.S. (20 Wall.) 64, 66-67, 22 L.Ed. 315. The interests of the employee himself must also be protected, and a restrictive covenant is unenforceable if by its terms the employee is precluded from pursuing his occupation and thus prevented from supporting himself and his family. See May v. Young, supra. Having stated these principles, which reflect the conflict of interests of the employer, the employee, and the public, we turn to a consideration of the claim made by the plaintiff employee in this case.

Under paragraph three of the agreement, upon the termination of his employment, the plaintiff employee was prohibited from participating in the management of a business of the type conducted by the defendant 'within the State of Connecticut.' Neither party to this action has cited any decision of this court which considers the validity of a statewide restriction. In other jurisdictions, however, statewide restrictions have been upheld as a valid protection of an employer's business. See Barb-Lee Mobile Frame Co. v. Hoot, 416 Pa. 222, 206 A.2d 59; Oxman v. Profitt, 241 S.C. 28, 126 S.E.2d 852; Dyar Sales & Machinery Co. v. Bleiler, 106 Vt. 425, 175 A. 27. The general rule is that the application of a restrictive covenant will be confined to a geographical area which is reasonable in view of the particular situation. See 54 Am.Jur.2d, Monopolies, Restraints of Trade, and Unfair Trade Practices, § 543. A restrictive covenant which protects the employer in areas in which he does not do business or is unlikely to do business is unreasonable with respect to area. See Dyar Sales & Machinery Co. v. Bleiler, supra; 54 Am.Jur.2d, supra, § 544.

It was the finding of the court that the defendant did business in...