Maintenance Specialties, Inc. v. Gottus

314 A.2d 279, 455 Pa. 327, 1974 Pa. LEXIS 633

• Court: Supreme Court of Pennsylvania
• Decided: January 25, 1974
• Docket: Appeal, 105
• Status: Published

Opinions

Opinion by

Mr. Justice O’Brien,

Appellant, Maintenance Specialties, Inc., is a corporation engaged in the business of distribution of a variety of parts and products used in vehicular maintenance, equipment maintenance and plant and building maintenance. Sometime in 1968, appellee, Ronald Gottus, became employed by appellant pursuant to an oral contract. On April 29, 1969, the parties entered into a written employment contract which included a covenant against competition after termination of employment.

February 23, 1972, appellant, alleging that appellee is now engaging in competition with it, in violation of the covenant against competition, filed a complaint in equity seeking an injunction. After oral argument, the chancellor granted appellee’s motion for judgment on the pleadings, and dismissed appellant’s complaint without leave to amend. This appeal followed.

The chancellor based his decision upon our opinion in Capital Bakers, Inc. v. Townsend, 426 Pa. 188, 231 A. 2d 292 (1967), where we refused to enforce a restrictive covenant because it was not ancillary to the taking of employment. The chancellor reasoned that since it was admitted that appellee had “taken employment” in 1968 under an oral agreement which did not include the restrictive covenant, it was apparent that the restrictive covenant was not ancillary to the taking of employment.

Appellant urges error, based on our opinion in Jacobson & Co. v. Int. Environment Corp., 427 Pa. 439, 235 A. 2d 612 (1967), where we agreed with the chancellor in that case that the rule that a restrictive covenant is not enforceable unless ancillary to the “taking of employment,” “did not mean to imply that for a restrictive covenant to be valid in any employer-employee contract such a covenant would have to be part of the original contract of employment between the parties. This would be an unrealistic requirement, for in many instances . . . the insertion of a restrictive covenant in the original contract would serve no valid purpose. An employer who hires a novice has no desire to restrict his present competitive force. Only when the novice has developed a certain expertise, which could possibly injure the employer if unleashed competitively, will the employer begin to think in terms of the protection of a restrictive covenant. This is an economic reality, and the law should be influenced by it.” 427 Pa. at 450.

In Jacobson, we distinguished Capital Bakers because in the latter case, the new contract was “without any change in [the employee’s] employment status.” 427 Pa. at 449. In other words, a restrictive covenant is enforceable if supported by new consideration, either in the form of an initial employment contract or a change in the conditions of employment.

In the instant case, if appellee’s employment status had changed beneficially when the parties reduced their agreement to writing, the law enunciated in Jacobson would dictate that the restrictive covenant, if reasonable, would be enforceable. However, the appellant does not aver that any such change took place and appellee states that no such change took place.¹ Consequently, the restrictive covenant is not enforceable and the complaint was properly dismissed.

Decree affirmed. Each party to bear own costs.

1 The written agreement was terminable by either party at any time on fifteen (15) days notice, although the employer could dispense with the notice if “in the sole judgment of the company, Ronald Gottus had been guilty of a breach of trust, neglect of the company’s interest, or by failure to follow faithfully the instructions given to him by the company or its authorized representative.” Even if the oral contract was terminable immediately without notice, the notice provision of the written contract would not be a sufficient change in the appellee’s employment status to render the restrictive covenant enforceable. See Markson Bros. v. Redick, 164, Pa. Superior Ct. 499, 66 A. 2d 218 (1949).