Constructive Discharge Does Not Invalidate Connecticut Non-Compete Agreements

Ms. Martha Mahoney worked for Drummond American LLC, a company that sold commercial grade chemicals and hardware to governmental and industrial customers, as its Connecticut Sales Agent until August 2008.  She was in charge of facilitating contact between the company and its customers.  Drummond had her sign a covenant not to compete as a condition of her employment with the company.  The non-compete agreement prohibited Ms. Mahoney from soliciting orders from or selling competitive products to any customers she solicited or sold to on Drummond’s behalf in the twelve months prior to termination.

The agreement detailed that the restrictions applied for two years following Ms. Mahoney’s termination.  Ms. Mahoney began to work for Share Corporation in August 2008.  The company was a direct competitor with Drummond and had Ms. Mahoney sign an agreement stating that she would honor her non-compete with Drummond during her employment with Share.  She contacted her previous Drummond customers however and sold Share’s products to twelve such customers.

The Lawsuit

Drummond sued Ms. Mahoney for breach of the restrictive covenant and asked the court to enforce the non-compete clauses.  Ms. Mahoney did not deny that she breached the non-compete agreement but argued that she should not be held liable for her breach because the agreement was invalid.  Her main contentions were that the agreement was unenforceable under the five-prong test as stated by the Connecticut Supreme Court in Scott v. Gen. Iron & Welding Co., 171 Conn. 132 (1976), and that her constructive discharge invalidated the agreement.  The court ultimately rejected these defenses, found in favor of Drummond, and ordered the non-compete agreement enforced.

Evaluating Non-Compete Reasonableness

In Scott, the court held that a non-compete agreement’s reasonableness is evaluated based on five factors: 1) duration of the restrictions, 2) geographic area of the restrictions, 3) degree of protection afforded to the employer, 4) restrictions on employee’s ability to pursue a career, and 5) any interference with the public’s interests.  Here, the court held that the agreement between Drummond and Ms. Mahoney did not violate any of these factors.  An employer possesses a proprietary right to its customers and is entitled to protect this right for a reasonable period.  The court held that a two-year period was reasonable and enforceable.

Furthermore, the court found that the provisions of the agreement were not overly broad and did not unnecessarily restrict her ability to earn a living.  The covenant only prevents her from soliciting and transacting with twenty-six customers, meaning that there were still thousands of potential clients not excluded under the agreement’s provisions.

Constructive Discharge

The court likewise rejected Ms. Mahoney’s argument that Drummond constructively discharged her and this action invalidated the non-compete agreement.  A constructive discharge is when the employer creates an intolerable work atmosphere that forces the employee to quit involuntarily instead of the employer directly terminating the individual’s employment.  The court held that the nature of an employee’s termination is irrelevant in this respect and does not affect the validity of the agreement and its legally binding nature upon the parties.

All of Ms. Mahoney’s defenses failed under the court’s scrutiny and analysis of the case, rending her liable for her breach of the non-compete agreement.

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