Mastrom, Inc. v. Warren

196 S.E.2d 528 (1973) 18 N.C. App. 199

MASTROM, INC. d/b/a Professional Management
v.
Jerry E. WARREN.

No. 7326SC316.

Court of Appeals of North Carolina.

May 23, 1973.

Elam & Stroud by William H. Elam, and Wade & Carmichael by J. J. Wade, Jr., Charlotte, for plaintiff-appellant.

Thomas E. Cummings, Charlotte, for defendant-appellee.

HEDRICK, Judge.

Plaintiff contends that "[t]he Trial Court committed error . . . in finding the employment contract void and unenforceable and in denying the preliminary injunction". We disagree.

Restrictive covenants not to engage in competitive employment are in partial restraint of trade and to be enforceable must be (1) in writing, (2) supported by valid consideration, and (3) reasonable as to terms, time and territory. The absence of any of these requirements is fatal. Greene Co. v. Kelley, 261 N.C. 166, 134 S.E.2d 166 (1964).

The contract of employment containing the covenant not to compete was executed by defendant more than three years after the commencement of his employment with plaintiff. "When the employment preexists the execution of the contracts, there must be some additional consideration to the employee to support his covenant not to compete. Greene Co. v. Kelley . . . [supra]." Wilmar, Inc. v. Liles and Wilmar, Inc. v. Polk, 13 N.C. App. 71, 77, 185 S.E.2d 278, 282 (1971), cert. denied, 280 N.C. 305, 186 S.E.2d 178 (1972).

Paragraph 7 of the employment contract provides:

"COMPENSATION: The Employer agrees to compensate Employee for his services rendered hereunder in accordance with the rates of compensation determined by designated officers of the Employer in accordance with policies of the Board of Directors. Tenure, proficiency and overall work load will be fairly taken into consideration by the Employer in establishing Employee's compensation for services rendered."

This provision of the employment contract fails to impose any obligation on plaintiff to increase or even refrain from decreasing the compensation to be paid to defendant. As appears from plaintiff's own evidence, "Each raise was based on merit, and it's totally in Mr. Burgin's discretion when he gives a raise." Therefore, evidence tending to show that defendant's raise was dependent on whether he signed the contract and that defendant did subsequently receive periodic raises after executing the contract does not relate these raises to the anticompetitive covenant or remedy the fact that the purported consideration, as recited in the employment contract, is illusory.

Defendant, as a further defense, stated that at the time he executed the contract:

"[H]e had been employed by the Plaintiff for over three years and was already completely familiar with the practices and procedures of the Plaintiff";

and that

"[H]is terms of employment with the Plaintiff remained the same."

Stanley Eugene Burgin testified:

"He has known the defendant, Jerry Warren, four and a half years and has supervised him at Professional Management for this entire period of time. While under the employment of Mastrom, Inc., Mr. Warren was afforded training and educational facilities by company divisional seminars, educational type programs, company-wide training sessions, plus information distributed from the company home office.

In his opinion, Mr. Warren's skills would make him a highly qualified and/or unique person in . . . profession."

Obviously, defendant had acquired a knowledge of plaintiff's business methods, territories and clientele prior to the execution of the employment contract and the conclusion is inescapable that:

"[I]n actuality the restrictive covenant not to compete here sought to be enforced is not an ancillary contract at all. It is the main purpose of the contract and not a subordinate feature. It becomes and is, therefore a naked contract not to compete not protected as to enforceability by the exceptions afforded ancillary contracts in restraint of trade permissible in connection with the sale of a going business, a contract of employment, or a lease." Wilmar, Inc. v. Liles and Wilmar, Inc. v. Polk, supra, 13 N.C.App., at 79, 185 S.E.2d, at 283.

For the reasons stated, the order of the trial court is

Affirmed.

CAMPBELL and PARKER, JJ., concur.