Thе plaintiff (All Stainless) appeals from a final decree dismissing its bill in equity which sought injunctive relief against a former employee (Colby) for violation of a covenant not to compete.
The judge made findings from which the following facts are taken. All Stainless made sales to industrial purchasers of stainless- steel fasteners, “including nuts, bolts, screws, as well as stаinless steel pipe valves and fittings.” It made distribution in all the New England States and New York. In January, 1961, Colby entered into an employment agreement with All Stainless. That agreement contained a covenant providing generally that on termination of his employment Colby would not compete with All Stainless in New England and New York for a period of two years. That agreement further provided that, following a six months’ trial period, the contract of employment would be for a period of two years and thereafter from month to month, terminable then by either party upon thirty days’ written notice.
In July, 1966, a new employment agreement was executed between Colby and All Stainless. It contained a restrictive covenant substantially the same as that appearing in the earlier agreement.
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The new agreement provided further that
In Novembеr, 1969, approximately seventeen months after he left the employ of All Stainless, Colby went to work as an outside salesman for a company in South Boston, Accurate Fasteners, Inc. (Accurate). Accurate was a competitor of All Stainless. When the plaintiff learned of Colby’s employment by Accurate, it filed this bill in equity on November 21, 1969, seeking preliminary and permanent injunctions to enforce the covenant not to compete and also seeking damages as a result of Colby’s acts. On December 4, 1969, a preliminary injunction was issued generally enjoining Colby from engaging in any business which was in competition with All Stainless within New England and New York. On December 19,
1969, in response to Colby’s motion for a bond to cover any lost earnings, attorney’s fees and consequential expenses “in the event that the Bill of Complaint is dismissed,” a judge ordered that the preliminary injunction be dissolved unless by December 24, 1969, a surety company bond should be filed by the plaintiff “conditioned to indemnify the defendant [Colby] for loss of earnings and or attorneys fees in the event the bill of complaint is dismissed.” Such a bond was seasonably filed.
The case was tried in January, 1970, and on February 10, 1970, the judge filed a document entitled “Findings, Rulings and Order.” He ruled that the restrictive covenant was unenforceable, dissolved the preliminary injunction and stated that the bill was dismissed. All Stainless appeals from a final decree dismissing the bill of complaint.
Although no report of material facts was requested, the parties have rightly treated the judge’s voluntary findings, which appear to be all the facts found by him, as if they were a report of material facts under G. L. c. 214, § 23. See
Birn
For us to determine whether the decree dismissing the bill was appropriate, we have found facts, additional to those found by the judge, concerning the nature of Colby’s work for All Stainless and for Accurate, the geographical area of his activities for each and the consequences, if any, of Colby’s employment by Accurate on any interest of All Stainless which might be entitled to protection in equity.
When employed as an outside salesman by All Stainless, Colby covered southern Maine, southeastern New Hampshirе and northeastern Massachusetts. He acted as a salesman making personal contact with old and potential customers of All Stainless. He started working for Accurate in October, 1969, and first became an outside salesman for it on November 12, 1969. The sales territory assigned to Colby by Accurate included that portion of New Hampshire which he hаd not covered during his latter years at All Stainless, a portion of eastern Massachusetts lying westerly of the area he had covered for All Stainless and five towns (Billerica, Burlington, Belmont, Watertown and Arlington) which he had covered for All Stainless. The inference is clear that, with the exception of those five towns, the territory assigned to Colby by Accurаte was carefully selected só as to avoid the territory served by Colby while he was selling for All Stainless. During the three weeks prior to the issuance of the preliminary injunction Colby called on some accounts within the five town area which he had covered for All Stainless and made some sales in that five town area. It is not clear on the record whether any such sale was of a product competitive
Colby’s work for All Stainless and Accurate involved gaining and maintaining the good will of his employer’s customers in a competitive sales environment. He was not assigned any managerial functions. There was no evidence that in November, 1969, Colby had any business secrets or confidential information acquired while employed by All Stainless which would have aided him in making sales outside his former sales area or would have aided Accurate in competing generally with All Stainless. It is clear, however, that All Stainless and Accurate were competitors and that because All Stainless’s principal contact with customers was through its outside salesmеn, the good will of All Stainless could be harmed by a former salesman’s calling on an All Stainless customer, with whom he had previously dealt, to solicit purchases on behalf of a new employer.
The judge concluded that the restrictive covenant was “entirely too broad and unreasonable as to time and space in that it encompasses the New England states and part of the State of New York, and it provides for a two-year restriction, whereas the contract was a month-to-month agreement.” He then ruled “[f]or these reasons” that the covenant was unenforceable and therefore void.
We hold that the geographical area covered by the covenant was too broad; that the two year limitation was not unreasonable; that, especially in these circumstances, the fact that the employee’s employment was terminable from month to month was not an adequate ground to deny the plaintiff relief; that the restrictive covenant should have been enforced to the extent it was reasonable; that, because the period of the two year restriction has expired, All Stainless is left to the recovery of any damages arising from Colby’s solicitation of customers within the sales territory covered by him immediately prior to cessation of his employment by All Stainless; and that, as an offset to any such damages, Colby is entitled to provе his financial losses attributable to the preliminary injunction restraining him (from December 4, 1969, to February 10, 1970) from selling in areas outside of
A covenant not to compete contained in a contract for personal services will be enforced if it is reasonable, based on all the circumstances.
Sherman
v.
Pfefferkorn,
The judge apparently concluded that the covenant was not enforсeable in any respect. This conclusion seems to have been based, at least in part, on the circumstance that Colby was subject to discharge on thirty days’ notice, while the expressed restraint against competition extended for a period of two years. Here, however, under two successive agreements Colby was potеntially subject to the same noncompe
Clearly the geographical limitations on Colby’s sales activities were far too broad. A former employer is not entitled by contract to restrain ordinary competition.
Club Aluminum Co.
v.
Young,
The plaintiff has failed, however, to show that its good will could have been harmed through sales activity by Colby outside of the sales territory formerly assigned to him. We see, therefore, no justification for enforcement of the restriction beyond Colby’s former sales territory. Such has been the general nature of the geographical limitations imposed by injunction on route salesmen рursuant to covenants not to compete.
Sherman
v.
Pfefferkorn,
Those of our cases which apply a broader restraint than the area of the employee’s customer contact are inapplicable. In some of those cases the threat to the employer’s good will came from the employee’s confidential knowledge of the employer’s business and from the nature of the employee’s duties for his new employer. See
Walker Coal & Ice Co.
v.
Westerman,
Our cases have generally not limited the enforcement of a former salesman’s rеstrictive covenant so as only to bar sales (a) to persons formerly solicited by the salesman within a geographical area or (b) to those to whom sales were in fact made in that geographical area through the salesman. But see
Whiting Milk Cos.
v.
O’Connell,
One further matter must be considered. As a condition of the continuance of the preliminary injunction аgainst Colby,
The decree is reversed, and the case is remanded to the Superior Court for a hearing on damages.
So ordered.
Notes
The restrictive covenant read: “The Employee further covenants that upon the cessation of his employment he will not compete with the Employer in the Employer’s business directly or indirectly, as a principal, agent, commission man, factor, salesman, consultant, or Employee in any business directly competing with the
We do not mean to suggest that all of our decisions can easily be related one to the other. These cases turn on their facts. Some of our older cases seem to rest in part on the assumption that a former employee should be held to the dimensions of his bargain, however uneven the bargaining power of the parties, without a substаntial analysis of the employer’s need for protection. See, e.g.,
Becker College of Business Admn. & Secretarial Science
v.
Gross,
The problems of enforcement of such a decree are far greater than where the decree speaks in terms of a geographical area. Moreover, a former employee is not apt to argue for such a decree because his new employer would not be likely to retain him to work in an area in which all or a portion of the potential customers could not be solicited by him.
If the bond had provided protection to Colby against any loss sustained by him because the restraint imposed by the preliminary injunction was broader than it should have been, it would have been of some value to Colby in this situation. Colby does not argue, however, that recovery on the bond is available to him if an injunction of some sort should properly have issued. See, however, annotation, 40 A. L. R. 990 (1926).