Case Background

Fairfaxx Corporation, a company based in Norwalk, Connecticut, employed Ms. Sarah Nickelson from January 1997 until she voluntarily terminated her employment on November 23, 1998.  Fairfaxx provided services for full and part-time employees to clients located in Fairfield and New Haven counties in Connecticut in addition to Putnam and Westchester counties in New York.  Ms. Nickelson first worked as a part-time receptionist for Fairfaxx at Aviator in Stratford, then as a temporary employee of Fairfaxx itself, and then hired on a permanent basis as a Personnel Consultant in May 1997.  She did not have an employment contract and as such, she was classified as an employee at will.

Seven months later, in December 1997, Fairfaxx’s employees, including Ms. Nickelson, were presented with a “Confidentiality and Non Compete Agreement”.  There was an understanding that the employees would be terminated should they refuse to sign the restrictive covenant.  Ms. Nickelson signed and returned the non-compete agreement on December 9, 1997.  The covenant not to compete prohibited Ms. Nickelson from recruiting candidates or soliciting clients in New Haven, Fairfield, Putnam, and Westchester counties for two years following her termination.

Breach of Covenant

Ms. Nickelson moved in November 1998 and was promptly contacted by a recruiter concerning a job at Premier Staffing Solutions, a company in direct competition with Fairfaxx.  She was offered a position with Premier and accepted due to the shorter commute and higher commission rate.  She ended her employment with Fairfaxx on November 23, 1998 and immediately began to work for Premier.

Fairfaxx sued Ms. Nickelson in Connecticut state court for breach of the covenant not to compete and requested that the court enforce the restrictions contained therein.  Ms. Nickelson argued that the non-compete agreement was not a valid employment agreement and she was not obligated to abide by its restrictions.  The court ultimately found in favor of Ms. Nickelson, invalidated the non-compete agreement, and denied Fairfaxx’s request for injunctive relief.

The Court’s Decision

The court came to this decision because the agreement lacked adequate consideration and the requisite signatures.  The non-compete agreement spoke of “mutual promises” but the court concluded that Ms. Nickelson received nothing in exchange for her covenants.  She had the same job, same salary, and same benefits after she signed the agreement as before its execution.  She was promoted to Manager of the Temporary Division at Fairfaxx in January 1998 but the court found that this was not in any way connected to the non-compete agreement and held that this could not be construed as consideration for the covenants that Ms. Nickelson gave to the company.

Furthermore, the court found that the non-compete agreement was not legally binding because it was only signed by Ms. Nickelson.  Fairfaxx noted that it clearly intended to sign the agreement and have its provisions become legally binding but did not actually know if someone from the company’s management had signed the covenant not to compete.  The agreement was designed to be a bilateral contract and would not become legally binding until both parties had signed.  The agreement contained signature blocks for Ms. Nickelson and Fairfaxx and required both in order for the restrictions/provisions to become effective.

In light of a missing requisite signature and inadequate consideration, the court held that the non-compete agreement was unenforceable and denied Fairfaxx’s request for injunctive relief.

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