Phelps Staffing, LLC v. C. T. Phelps, Inc.
740 S.E.2d 923
N.C. Ct. App.2013Background
- Phelps Staffing demanded noncompetition and alleged CT Phelps flipped employees to work for Hoover and others.
- Plaintiff alleged billing by CT Phelps for work performed by plaintiff’s former employees was improper.
- Trial court held the noncompetition unenforceable as public policy; conversion claim lacked merit; UDPA depended on the other claims.
- Plaintiff’s damages sought: $5,267.12 for Hoover billing; court recommended payment or separate suit.
- Court affirmed summary judgment for defendants on tortious interference and UDPA; conversion claim abandoned.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the noncompetition agreement enforceable? | Phelps Staffing’s agreement is not unenforceable. | Agreement is unconscionable and against public policy. | Unenforceable as a matter of public policy. |
| Does CT Phelps’ billing constitute UDPA independent of other claims? | Billing constitutes unfair/deceptive practices. | No independent UDPA facts beyond other claims. | UDPA claim fails; no independent circumstances. |
| Does the unenforceability defeat the tortious interference claim? | Interference exists despite unenforceability. | Unenforceability defeats tortious interference claims. | Tortious interference cannot be grounded on unenforceable contract. |
| Should plaintiff recover the $5,267.12 for Hoover billing? | Entitled to damages separate from other claims. | Either pay or sue separately; no separate award here. | Damages not awarded here; independent action possible. |
Key Cases Cited
- Starkings Court Reporting Services v. Collins, 67 N.C. App. 540, 313 S.E.2d 614 (1984) (unenforceability when restrain is to stifle competition)
- United Laboratories, Inc. v. Kuykendall, 322 N.C. 643, 370 S.E.2d 375 (1988) (five-factor test for enforceability of covenants)
- Beam v. Rutledge, 217 N.C. 670, 9 S.E.2d 476 (1940) (line between freedom to contract and public policy)
- Electrical South, Inc. v. Lewis, 96 N.C. App. 160, 385 S.E.2d 352 (1989) (protects unique employer assets; restricts against mere competition)
- Kadis v. Britt, 224 N.C. 154, 29 S.E.2d 543 (1944) (public policy limits on restraints)
- Wilmar, Inc. v. Liles, 13 N.C. App. 71, 185 S.E.2d 278 (1971) (public policy scrutiny of restrictive covenants)