Five Prong Test for Non-Compete Agreement in Connecticut
by
The Employment Agreement
General Iron & Welding was a Meriden, CT-based company engaged in the business of welding and fabricating metals. Mr. Roy Scott began his employment with the company as an apprentice welder in 1958/59. During his employment with the company, Mr. Scott received valuable training and experience that allowed him to become a manager in 1968 and then chief engineer in 1971. Mr. Scott agreed to a non-compete covenant as part of his promotion and signed the agreement on April 6, 1971. The agreement prohibited Mr. Scott from disclosing vital business information including customer contact lists, processes, product details, and research.
Additionally, the agreement prohibited Mr. Scott from participating in the management of a similar business within Connecticut for a period of five years. He returned to a lower position following a wage dispute and on March 24, 1972 Mr. Scott voluntarily left General Iron & Welding and found work with Kiely Manufacturing Company where he had hopes to participate in the management of that company in some capacity.
The Court’s Decision
Mr. Scott brought action asking the court to invalidate the non-compete agreement between himself and General Iron & Welding. The trial court refused to invalidate the agreement and Mr. Scott appealed the decision. The Supreme Court of Connecticut affirmed the lower court’s decision and held in favor of General Iron & Welding. The Supreme Court concluded that the agreement had adequate consideration, contained reasonable terms, and was therefore enforceable.
More importantly however, the court’s decision created a five-prong test to assess the validity and enforceability of a non-compete agreement. In order for an agreement to be legally binding, it must exhibit the following characteristics: 1) reasonable with respect to time, 2) reasonable with respect to place (geography), 3) afford the employer a fair degree of protection, 4) cannot place an excessive burden on the employee’s opportunity to pursue his occupation, and 5) cannot interfere with the interests of the public. The court instituted and applied this five-part test in its conclusion that the covenant had fair provisions that rendered it valid and enforceable.
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