delivered the opinion of the Court.
The question presented is the validity of a restrictive covenant in an employment contract between a company engaged in the business of tree care and one of its area managers, under which the employee agreed not to compete with his employer for a period of two years after the termination of his
The case was tried on a written stipulation of the parties and testimony was limited to the issue of whether the parties had agreed to a modification of the original contract respecting compensation or whether there had been a material breach by the company in changing the compensation. The appellant, Ruhl, while not agreeing with Judge Carter’s findings of fact on the issue on which testimony was taken, properly concedes that the findings were not clearly erroneous. For the purposes of this appeal, therefore, the facts are not in dispute and the sole issue is the validity of the restrictive covenant. The trial judge ruled that the contract of employment, including the covenant not to compete, was valid, found that Ruhl impliedly agreed to the modification of his employment contract by the substitution of a new pay plan for the former one, awarded the appellee damages in the amount of $4420, the amount stipulated by the parties in the event of a decision against Ruhl, and enjoined Ruhl, his agents and employees, from engaging in any way in any business or operation for the care, preservation or treatment of trees in competition with the business carried on by the appellee for two years from April 7, 1965 (the date Ruhl ceased receiving compensation) in the six-county area covered by the restrictive covenant.
The appellee, The F. A. Bartlett Tree Expert Company (Bartlett), a Connecticut corporation, has for many years engaged in the business of general tree care, surgery and line clearance work in several states and has been doing business in the Easton, Talbot County, area for the last twenty-five years. The principal nature of the business done out of the Easton office consists of tree care work performed for private home owners and municipal authorities. The business is highly competitive with similar companies operating in the area. In soliciting prospective customers, Bartlett submits bids taking into consideration the labor involved, machinery to be utilized, materials to be expended, and percentage of profit to be realized on each job.
As area manager of Bartlett’s Easton office, Ruhl solicited tree care work in the six-county area, supervised such work and was in charge of the administration of the Easton office. He was compensated pursuant to the schedule attached to the contract of employment. During his 3j4 years employment as area manager at Easton, Ruhl contacted old customers of Bartlett and potential new customers, suggested tree work that should be done and quoted prices. Sales leads were furnished him from Bartlett’s office and secured through Bartlett’s advertising. Some business was procured directly by Ruhl. Personal contracts between Ruhl and the customers were essential to the continued well-being of Bartlett’s operation in the area. From October, 1961 to January, 1964, Ruhl was the only person in Bartlett’s Easton office acting as a sales representative; thereafter, an additional sales representative was added.
As Bartlett’s area manager, Ruhl was issued a “Standard Practices” manual describing in detail practices and procedures in the care and maintenance of trees approved by Bartlett. He was also issued weekly laboratory releases from Bartlett’s main office in Stamford, Connecticut giving current information developed by Bartlett on the diagnosis and treatment of particular tree diseases and problems. He also attended division meetings where information on sales and operations was exchanged with other area managers. When Ruhl was appointed area manager in 1961 he was given a card index containing the names and addresses of all customers for whom Bartlett had previously done work in the six-county area, the amount charged each of them and the date when the work was done.
The business done by the Easton office in the area assigned Ruhl amounted to $57,300 in 1964. Of this amount $11,700 or
Ruhl was trained in the tree business by his uncle from the age of fourteen. He has only a high school education. In 1959, when he was twenty, he was employed by Bartlett as a sales representative and in other positions at other locations until his appointment as area manager at Easton in October, 1961. The tree business is the only means of livelihood in which Ruhl has ever engaged. On April 26, 1965, after his resignation from Bartlett’s organization, he became the sole proprietor of Wye Tree Experts, whose business is all phases of the care of shade trees. This company operates in all the six counties originally assigned to Ruhl by Bartlett. Since establishing his company, Ruhl has solicited and obtained tree care work within this six-county area from many persons who, prior to> Ruhl’s resignation, were Bartlett customers. The total business done by Wye Tree Experts in 1965 amounted to approximately $27,000 of which about two-thirds was derived from former Bartlett customers.
This Court has had a number of cases involving the validity of restrictive covenants in a contract of employment. Covenants of this nature are in restraint of trade; the test is whether the particular restraint is reasonable on the specific facts. The general rule in Maryland, as in most jurisdictions, is that “restrictive covenants in a contract of employment, by which an employee as a part of his agreement undertakes not to engage in a competing business or vocation with that of his employer on leaving the employment, will be sustained ‘if the restraint is confined within limits which are no wider as to area and duration than are reasonably necessary for the protection of the business of the employer and do not impose undue hardship on
The development of the law on this subject is analyzed in Blake, “Employee Agreements Not to Compete,” 73 Harv. L. Rev. 625 (1960). The multitude of cases are classified in two encyclopedic annotations in
In the case before us, Bartlett is engaged in a highly competitive industry. The contract of employment refers to the trade secrets to which Ruhl was to have access, but, on the record, no trade secrets were involved. See
Operation Research, Inc. v. Davidson & Talbird, Inc.,
This Court has recognized the importance of the personal relationship between the employee and his employer’s customers-whom the employee serves on a particular route, when the element of competition in the sale of the product was less significant than the employee’s relationship with the persons he served. In such cases, restrictive covenants were held valid when they were found reasonable as to duration and area.
Western Md.
Even though the employer has a legitimate interest in the protection of its clientele, the restrictive covenant will not be enforced if under all the circumstances the covenant is unduly restrictive of the employee’s freedom. “[T]he right to labor or use one’s skill, talents, or experience for one’s own benefit, or furnish them to another for compensation, is a natural and inherent right of the individual * * *”
Deuerling v. City Baking Co., supra,
In his services for Bartlett, Ruhl received training and ex
An essential condition to. the validity of a restrictive covenant in an employment contract is that it causes no substantial injury to society.
Tawney, supra,
“There are interests of public policy as well as of private rights to be balanced in the category of cases in which this litigation falls. It is important to our economic system as well as to employers that proprietary interests of businesses be properly protected; it is important to the free competition basic to our national development as well as to the individual rights of employees who want to go into business, for themselves that their spirit of enterprise be not unduly hampered. It is the facts in the particular case which weight the scales.”
In this case, the tree business is highly competitive, with companies similar to Bartlett operating in the area involved. No danger of a monopoly is apparent. On the facts, we find that
Two years is a long time in the life of a young man with a family to support to be precluded from engaging in the only business which he knows in the area in which he grew up and where he lives. Had Ruhl’s employment been terminated by Bartlett through no fault of Ruhl’s, a different legal situation might well have been presented. See
Macintosh, supra,
As was pointed out in
New England Tree Co. v. Russell, supra,
The area involved is that in which Ruhl actively worked for Bartlett during his employment. It is an area in which the geographical and economic conditions are substantially similar. Unlike the situation in
Tawney,
the six counties do not include a densely populated area such as metropolitan Baltimore, in which there were several hundred thousand persons with whom the employer had no association of any kind. In
Ahlers,
the restrictive covenant applied to any of the territories in which the employee had worked; the Vice-Chancellor restricted the scope of the injunction to three counties in New Jersey and two in New York, the area in which the employee had spent most of his time while in the employer’s service. In
New England Tree Expert Co., Inc., supra,
the prohibited area in the injunction was the part of New England covered intensively by the company’s so
On the particular circumstances of the case before us, we find that the provisions of the restrictive covenant as to area and duration were not unreasonable and that the covenant is valid.
Judgment and decree affirmed; costs to be paid by appellant.
Notes
. The employer’s legitimate interest in endeavoring to protect the customer contacts which he has been able to develop is well stated in Blake, “Employee Agreements Not to Compete,” 73 Harv. L. Rev. 635, 653-54 (1960) :
“In almost all commercial enterprises, except in the few cases in which the market approaches the ideal of perfect competition, contact with customers or clientele is a particularly sensitive aspect of the business. In smaller concerns, or even in large businesses with a relatively small clientele, sales and customer service are typically handled largely by the proprietor or one or more of the partners or trusted officers, depending upon the form of business organization. In most businesses, however, as the size of the operation increases, selling and servicing activities must be at least in part decentralized and entrusted to employees whose financial interest in the business is limited to their compensation. The employer’s sole or major contact with buyers is through these agents and the success or failure of the firm depends in part on their effectiveness.Although the employee’s job may be limited to servicing an existing customer route or list, or dealing with those who come to the employer’s place of business or do business by mail or telephone, in many cases he is expected to bring in new business. In any of these situations, the possibility is present that the customer will regard, or come to regard, the attributes of the employee as more important in his business dealings than any special qualities of the product or service of the employer, especially if the product is not greatly differentiated from others which are available. Thus, some customers may be persuaded, or even be very willing, to abandon the employer should the employee move to a competing organization or leave to set up a business of his own.”