Posted by Joshua R. Goodbaum in Employment Law
Jan 24 2023
The nature of non-compete litigation – in particular, its (often exclusive) focus on the preliminary injunctive stage – means that non-compete cases rarely reach a final judgment and the Connecticut Supreme and Appellate Courts thus rarely have the opportunity to opine on this important area of employment law. And that perhaps explains how Connecticut Superior Court judges can spend decades intractably divided about what would seem to be a fairly straightforward legal question.
So it has been with the question of whether the continuation at-will employment constitutes sufficient consideration for a Connecticut covenant not to compete to be enforceable. Or, put another way: If an employer requires an existing at-will employee to sign a non-compete without offering that employee any benefit other than the continuation of the employee’s at-will employment, does the employee actually get something of value such that the non-compete amounts to a contract in the eyes of the law?
Well, we now have an answer to that question, and it is, “Yes.”
The case – Schimenti Construction Co. v. Schimenti (AC 44274) (Jan. 17, 2023) – involves (as the name suggests) a dispute within a family construction business. The defendant, Joseph Schimenti, left the family business to join a competitor, despite having signed a non-compete that purported to prohibit him from doing so. Joseph’s cousin and the sole owner of the plaintiff company, Matthew Schimenti, decided to sue. In the Superior Court, Judge Moukawsher granted summary judgment for the defendant on the grounds that the non-compete was not supported by consideration – and therefore was legally unenforceable – because the only thing Joseph received in exchange for the non-compete was continued at-will employment.
A three-judge panel of Appellate Court (composed of Chief Judge Bright and Judges Cradle and Seeley) unanimously reversed. The Appellate Court held that it did not need to evaluate the question from first principles because, in its view, two ancient Connecticut Supreme Court cases controlled the question.
In one case, Roessler v. Burwell, 119 Conn. 289 (1934), the Connecticut Supreme Court held that a non-compete was enforceable even though the only benefit the employee received in return was “indefinite[]” employment, which the Appellate Court understood to be “essentially” tantamount to “at-will employment.”
In the other, Torrington Creamery v. Davenport, 126 Conn. 515 (1940), the Connecticut Supreme Court cited its earlier Roessler case for the proposition that, “While, under the contract, [the plaintiff] could discharge the defendant at any time, this did not make the contract one lacking in mutuality as regards the enforcement of the covenant in question.”
The Appellate Court concluded that these two cases “remain[ed] binding precedent” and dictated that “consideration in the form of continued employment for at-will employees can be sufficient to make enforceable a restrictive covenant agreed to by the parties at some point after the commencement of employment.”
For what it’s worth, all of these cases – Schimenti Construction, Roessler, and Torrington Creamery – involved employees who resigned, so it is possible that this same rule would not apply to employees who are terminated by their employers.
It is also possible that this case or another case could make its way to the Connecticut Supreme Court, which would have the opportunity – although not the obligation, of course – to re-evaluate this doctrine.
And it is possible that the Connecticut General Assembly will moot all of this common-law development by passing a statute that regulates non-competes – including the issue of consideration – with more specificity.
For now, though, the longstanding question of consideration finally has an answer.
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If you have questions about a non-compete agreement, please contact the Connecticut employment lawyers at Garrison, Levin-Epstein, Fitzgerald & Pirrotti, P.C. We’re here to help.
Posted by Joshua R. Goodbaum in Employment Law
