Court Awards Damages for Breach of Non-Compete Agreement
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Mr. Anthony DiNicola worked for Van Dyck Printing Company as a sales representative from March 11, 1969, to April 1987. Mr. Leonard Drabkin, Van Dyck’s president, who had known Mr. DiNicola from Columbia Printing Company where Mr. DiNicola had worked for thirteen years, hired him. Mr. DiNicola received as wages a car allowance, $150.00 per week draw on his commissions pay, and commissions for sales such that he received at least 7% on the first $100,000 of sales and a higher percentage on sales beyond $100,000. It was not until a month into working that Van Dyck presented Mr. DiNicola with an employment agreement that the parties both signed.
The employment agreement contained the finalized commission rate schedule that would apply to Mr. DiNicola’s employment with Van Dyck. The agreement also contained a covenant not to compete that prohibited him from providing services to Van Dyck’s customers while working for a company that provided services in “any way similar to the type of business conducted by Employer [Van Dyck] at the time of termination of this agreement” for a period of twelve months. The restrictive covenant further stipulated that the agreement would become enforceable by injunction for an addition twelve months (extending the total duration to twenty-four months) if there was evidence of a breach.
Breach of the Non-Compete
Mr. DiNicola voluntarily terminated his employment with Van Dyck in April 1987 and immediately began to work for Image Development, Inc., a new company he formed with a second former Van Dyck employee. He owned 50% of the shares in the company until he sold them in 1989 to his partner. Van Dyck sued Mr. DiNicola for breach of the non-compete agreement and sought damages since injunctive relief was moot due to the expiration of the time period for enforcement by injunction.
Mr. DiNicola argued that the agreement was not enforceable and that Van Dyck was not entitled to any damages because the agreement lacked consideration. He further argued that Van Dyck breached the employment contract during his employment by “unilaterally changing the terms to suit itself”. The Superior Court in New Haven held that the non-compete agreement was enforceable and granted Van Dyck’s request for relief in the form of damages.
Past Consideration vs. New Consideration
As a general contract principle, past consideration cannot be used to legitimate an agreement between an employer and employee once the employee has already commenced employment. Mr. DiNicola asserted that there was not any new form of consideration when he signed the non-compete agreement that would make its provisions binding on him.
The court rejected this contention and found that there was indeed new consideration for the non-compete agreement in the form of the finalized commission rate schedule that had previously not existed. When Mr. DiNicola began with employment with Van Dyck, not all of the precise employment provisions were finalized between the parties. It was the employment contract and non-compete agreement that contained the finalized employment details and resolved any existing questions or issues.
The Court’s Decision
The court likewise rejected Mr. DiNicola’s claim that Van Dyck had invalidated the non-compete agreement when it unilaterally changed its provisions to overwhelmingly favor its interests over those of him. He argued that the company had repeatedly changed the method used to calculate his commission payments. The employment agreement did not specify a method to be used to calculate Mr. DiNicola’s payments under the commission rate schedule and as such, any change in method would not constitute a breach of Van Dyck’s obligations under the agreement.
The court recognized that the period allowing injunctive relief had expired but granted Van Dyck’s request for damages. Damages, according to the court, were calculated and awarded to reflect the loss suffered by the enforcing party (Van Dyck) in relation to Mr. DiNicola’s breach of the non-compete agreement. The court calculated that Van Dyck lost $169,000.69 in sales in direct connection to Mr. DiNicola’s breach and applied a 35% company profitability rate, a statistic presented during Mr. DiNicola’s testimony. This meant a total damages award of $59,151.29 for Van Dyck Printing Company.
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