Capricorn Systems, Inc., employer/plaintiff, sued Dinesh Pednekar, employee/defendant, for breach of an employment contract that required the computer consultant to either complete a job assignment or provide one month’s minimum notice prior to voluntary termination of employment and provided for $50,000 in liquidated damages. In addition to the unenforceable liquidated damages provision, the contract also contained two unenforceable restrictive covenants that were void. However, the contract contained a sever-ability clause that allowed the other contract terms to survive. The complaint contended that defendant’s leaving the plaintiffs employment without a month’s notice caused it damage with the client. However, plaintiff neither pled nor proved any damages other than the liquidated damages, which it sued to recover. The trial court granted summary judgment to the defendant, because the void restrictive covenants voided the entire contract. Plaintiff appeals. We reverse, because the termination notice provision is not a restrictive covenant, and the entire contract was not voided by the void provisions.
1. Plaintiff contends that the trial court erred in treating the employee pre-termination notice as a restrictive covenant. We agree.
The employee’s contractual duty to provide a specified termination notice to the employer under the contract is not a restrictive covenant and does not constitute a covenant that falls along with the void restrictive covenants in the contract. See generally
Kuehn v. Selton & Assoc., Inc.,
Notice provisions in contracts “must be reasonably construed.”
APAC-Ga. v. Dept. of Transp.,
2. Plaintiff contends that the trial court erred in finding that the entire contract was void, because the contract contained not only void restrictive covenants and a void liquidated damages clause, but also contained a severability clause. We agree.
(a) The noncompete and nonsolicitation covenant is overly broad and unenforceable. It provided:
For a period of twenty four (24) months following the completion of project, the employee unconditionally agrees to not deal directly, indirectly, or by any other means, either individually or in association with another individual or organization, with Corporation’s customer or their client to whom he is assigned for on-site consulting project.
Such provision prohibits the defendant from soliciting any customer of the plaintiff anywhere that it does business, even though the defendant has had no relationship with such customer or the customer’s clients, which is an overbroad and unreasonable territory. This restriction also affects any activity of employment with a competitor, because there is no restriction to only such activity that defendant carried on for the plaintiff or that defendant carried on for the client as part of an on-site consulting project.
Where a former employee is prohibited from working in any scope or capacity of employment for a competitor of the former employer, such covenant not to compete is unenforceable as being overly and unreasonably broad.
Firearms Training Systems v. Sharp,
(b) The next covenant is against solicitation of clients, employees, or business opportunity, and such is even broader and unenforceable as to territory and nonrelationships with clients or employees:
The employee shall not, for a period of two (2) years after termination thereof, whether voluntarily or involuntarily, with or without cause, directly or indirectly, either for self or in conjunction with or on behalf, call upon, solicit, divert, take away, attempt to accept or take away: (a) any employees of the Corporation; (b) any business opportunity of the Corporation which became known to the Employee while employed by the Corporation; (c) any of the Corporation’s clients; or (d) any of the Corporation’s clients’ clients whose identity became known to the Employee or with whom the Employee may have had contact during the course of his employment with the Corporation.
The nonsolicitation of customers covered any and all customers of the plaintiff, regardless of whether defendant had ever worked for them or had any relationship established during employment anywhere. Therefore, such provision was void as overly broad and unreasonable in territory and in absence of relationships needing protection, because the relationships were developed during the employment. See
(c) Liquidated damages are not favored when they act as a penalty, because they can be abused to coerce compliance with abusive or void noncompetition contract provisions, as in this case. See OCGA § 13-6-7;
AFLAC, Inc. v. Williams,
For liquidated damages to be recoverable under a contract, (1) injury caused by the breach must be difficult or impossible of estimation in fact and not merely contended by the contract; (2) the parties must intend to provide for damages; and (3) the sum stipulated must be a reasonable pre-estimate of the probable loss.
Oasis Goodtime Emporium I v. Cambridge Capital Group,
In this case, $50,000 liquidated damages for a failure to provide a month’s notice when there are two other contract provisions which set forth how to accurately calculate special damages in such case constitute an unenforceable penalty. “Thus, even if we assume the liquidated damages provision is unenforceable, there would be no reason not to give effect to the severability agreement contained in the contract and enforce the contract without the liquidated damages clause. See OCGA § 13-1-8.”
Chaichimansour v. Pets Are People Too,
Notwithstanding that the liquidated damages clause is unenforceable and no special damages have been pled, defendant is not entitled to summary judgment for failure to prove any damages in this case, because in every breach of contract, a plaintiff is entitled to recover nominal damages. See OCGA § 13-6-6;
Belcher v. Thomson Newspapers,
supra at 467;
Don Swann Sales Corp. v. Parr,
(d) Void restrictive covenants, which cannot be blue-penciled out of the contract, do not void the entire contract when the contract contains a severability clause or when other valid post-termination provisions
The intent of the parties determines whether the entire contract is void if one provision is void, because the entire contract is the entire consideration for both parties, or the valid provisions survive as part of multiple consideration for the parties.
Carlton v. Moultrie Banking Co.,
Judgment reversed.