Court Opinion

ID: 8180566
Source: CourtListenerOpinion
Date Created: 2022-09-09 22:35:10.023692+00
Date Added: 2024-06-11T16:40:10.010798
License: Public Domain

Neely, Justice,

dissenting:

I dissent from the majority opinion not because I necessarily disagree with the result but rather because I object to the analysis employed by this Court in reaching that result. The development of the circumstances surrounding the restrictive covenant in question is insufficient to determine if the contract is an unreasonable restraint on trade. Yet that is precisely what this Court should have focused upon in deciding this case. Instead, the decision turned upon a questionable interpretation of contract law in order to achieve the desired result.
The majority’s analysis is faulty in two respects. First, the conclusion that the forbearance from firing an employee does not constitute consideration contradicts traditional contract theory. Secondly, and more importantly, the concentration on the issue of consideration should be omitted if the restriction is unreasonable as the majority also contends. If the restriction is unreasonable, the question of consideration is secondary since covenants not to compete are primarily concerned with restraints on trade. The validity of the contract should be based on the employer’s interest in the protection against the use of unfair competitive methods by the employee balanced against the employee’s interest in economic mobility and personal freedom to follow his interests. National Homes Corp. v. Lester Indus., Inc., 293 F. Supp. 1025 (W.D. Va.), aff'd in part and rev’d in part, 404 F.2d 225 (4th Cir. 1968).
The majority concluded that the continuation of employment at the time of executing a subsequent restrictive covenant did not constitute a new consideration sufficient to support the contract. While the majority correctly noted that the states are almost equally divided on this point, see Annot., 51 A.L.R.3d 825 (1975), the treatises and commentaries find that the forebearance from the lawful right to discharge an employee consti*433tutes sufficient consideration.1 Had the employee been working for years for the firm before being required to sign the covenant, the consideration issue might be capable of being wedged into existing law, particularly when a gloss of the developing law of “unconscionability” and “contracts of adhesion” is applied to it. From the sparse record in the case before us, however, I doubt that a surprising and unreasonable exercise of coercion constituting unconscionable action (e.g., an ultimatum that a 20 year employee with family responsibilities either sign forthwith or be fired on the spot) exists which would justify application of these doctrines.2
Thus this case should have examined whether there was direct competition, whether the employee had *434knowledge of secret information, whether the time and geographic restraints were too broad, etc. The Court sidestepped these issues and decided that the difficulties would best be overcome by excluding them from consideration. This Court should decide whether the employee’s unequal bargaining position resulted in an unreasonable restraint of trade. Meissel v. Finley, 198 Va. 577, 95 S.E.2d 186 (1956).

 In an article cited approvingly by the majority the author concludes that “[T]he almost universally accepted view now is that any substantial performance by the employer (i.e. actual employment of the employee for any substantial period) makes the restraint enforceable against the employee.” H. Blake, “Employee Covenants Not to Compete” 73 Harv. L. Rev. 625, 669 n. 145 (1959-60). Similarly, “[I]f the employee agreement is for no definite period, or is “at will,” a new agreement modifying the salary to be paid or the work to be done is not invalid for lack of sufficient consideration ... the same is true where one party, having a power of termination, forbears to exercise it in return for a new promise.” 1A Corbin, Contracts § 175 (1951).

 Except for the single case cited by the majority, Kistler v. O’Brien, 464 Pa. 475, 347 A.2d 311 (1975), all the cases finding the consideration to be insufficient involved a covenant signed after the employee had already worked for a substantial period of time. While the employee in this case signed the covenant on the day he started his employment, courts have held that restrictive covenants unsupported by any additional consideration are valid even if the employee has already worked for a significant period of time. Farm Bureau Service Company of Maynard v. Kohls, 203, N.W.2d 209 (Iowa 1972) (restrictive covenant executed two months after employment began); Daughtry v. Capital Gas Co., 285 Ala. 89, 229 So.2d 480 (1969) (restrictive covenant executed six months after employment began); McQuown v. Lakeland Window Cleaning Co., 136 So.2d 370 (Fla. Dist. Ct. App. 1962) (restrictive covenant executed more than one year after employment began); and Breed v. National Credit Ass’n., 211 Ga. 629, 88 S.E.2d 15 (1955) (restrictive covenant executed four months after defendant employed).