Safety Equipment Sales & Service, Inc. v. Williams

206 S.E.2d 745 (1974)

22 N.C. App. 410

SAFETY EQUIPMENT SALES & SERVICE, INC. v. James Jay WILLIAMS and Rodney Hudson Boswell.

No. 745DC302.

Court of Appeals of North Carolina.

July 17, 1974.

*747 Goldberg & Anderson by Frederick D. Anderson, Wilmington, for plaintiff appellee.

Anderson & Hughes by John R. Hughes, Shallotte, for defendants appellants.

HEDRICK, Judge.

The defendants maintain that the restrictive covenants in their respective contracts are invalid and unenforceable and, therefore, that the trial court erred in continuing the restraining order against them. A covenant in an employment contract providing that the employee will not engage in competition with his former employer upon termination of his employment, although unfavored in the law, will be held valid if the following criteria are satisfied: (1) the contract is in writing; (2) the parties entered into the contract at the time of and as a part of the employment contract; (3) the contract is founded upon valuable considerations; (4) it is reasonable both as to time and territory; (5) the contract is fair to both the employer and employee and not against public policy. Asheville Associates v. Miller and Asheville Associates v. Berman, 255 N.C. 400, 121 S.E.2d 593 (1961); Industries, Inc. v. Blair, 10 N.C.App. 323, 178 S.E.2d 781 (1971).

Defendants do not argue that the covenants enforced by the trial court in the instant case are not in writing; however, they do assert that the covenant fails with respect to the other factors enumerated above.

We first consider defendants' contention that the contracts are void and unenforceable for lack of consideration to support them. Defendants recognize the general *748 rule that if restrictive covenants are contained in the initial employment contract then they are founded upon adequate legal consideration, as the mutual promises of employer and employee provide valuable considerations each to the other for the contract. Greene Co. v. Kelley, 261 N.C. 166, 134 S.E.2d 166 (1963). However, defendants, relying upon Kadis v. Britt, 224 N.C. 154, 29 S.E.2d 543 (1944), state that the requisite consideration was absent in this case due to the fact that the relationship of employer and employee antedated the existence of the restrictive covenants and that the subsequent covenants not to compete were not based upon new consideration, such as change in position or an increase in pay.

Defendants' point would be well taken if the record revealed factual circumstances consistent with their argument, but a careful review of the record reveals that the written contracts of employment containing the covenants not to compete were entered into by each of the defendants at the time they were employed by the plaintiff. Furthermore, each of the contracts recite that the defendants were to receive valuable considerations from plaintiff in that plaintiff agreed to economically reward the defendants for their efforts and also promised to train the defendants in certain processes and practices confidential to the plaintiff's business. It is our view that the contracts meet the consideration requirement, and that this assignment of error is without merit.

Next, we must pass upon defendants' contention that the terms of the restrictive covenants as to time and territory are too broad. The defendants-employees argue that the territorial limitation (150 mile radius from Wilmington) and the time period restraint (two years) are on their face unreasonable. The record reveals that the plaintiff is engaged in business in an area encompassing a 175 mile radius of Wilmington; and, thus, the territorial limitation sought to be imposed does not cover an area in which the plaintiff is not engaged in business. See Comfort Spring Corp. v. Burroughs, 217 N.C. 658, 9 S.E.2d 473 (1940). In fact, our Supreme Court has upheld the validity of restrictive covenants which contain limitations (time and territorial) as large or larger than the restrictive covenants in the present case. Enterprises, Inc. v. Heim, 276 N.C. 475, 173 S.E.2d 316 (1970) (Nationwide restraint for two years); Exterminating Co. v. Griffin and Exterminating Co. v. Jones, 258 N.C. 179, 128 S.E.2d 139 (1962) (greater than 150 miles for two year period); Exterminating Co. v. Wilson, 227 N.C. 96, 40 S.E.2d 696 (1946) (thirteen county restraint for two years); Studios v. Goldston, 249 N.C. 117, 105 S.E.2d 277 (1958) (74 county restraint in N. C., all of South Carolina, and eleven counties in Georgia for a period of two years).

Finally, an examination of (1) the need for protection of the employer and (2) the import of the restrictive covenants upon the public in general, reveals that the restrictive covenants are reasonable in their terms.

The trial court in the present case found as a fact that defendants by their employment with plaintiff had become familiar with the plaintiff's customer lists and that the defendants were now posing a substantial threat to plaintiff's business by calling upon plaintiff's customers. Moreover, the trial court found as a fact that the defendants had gained knowledge about the plaintiff's methods of service, repair, and care of fire fighting equipment. These facts, which are supported by competent evidence and thus binding upon us on this appeal, are sufficient, all other things being equal, to support the covenants. See, Annot. 9 A.L.R. 1456 and Blake, Employee Agreements Not To Compete, 73 Harvard Law Rev. 625 (1960).

Moreover, there has been no showing that the public will be harmed by the enforcement of these restrictive covenants. Although contracts restraining employment *749 are not viewed favorably in modern law, Kadis v. Britt, supra, the courts continue to consider it "as much a matter of public concern to see that valid engagements are observed as it is to frustrate oppressive ones." Sonotone Corp. v. Baldwin, 227 N. C. 387, 42 S.E.2d 352 (1947).

For the reasons herein stated, the judgment of the trial court continuing the restraining order pending a final hearing of this matter is

Affirmed.

BRITT and CARSON, JJ., concur.