Court Opinion

ID: 9629936
Source: CourtListenerOpinion
Date Created: 2023-08-22 09:53:48.521321+00
Date Added: 2024-06-11T18:07:27.546441
License: Public Domain

MANDERINO, Justice
(dissenting).
I dissent. The majority opinion by Mr. Justice Roberts and the concurring opinion by Mr. Justice Pomeroy both concede that a restrictive covenant may be unreasonable at the time the covenant is made, and if so, equity should not enforce such a covenant by rewriting it with reasonable terms. Thus, Mr. Justice Roberts concedes that a “gratuitous overbreadth militates against enforcement because it indicates an intent to oppress the employee and/or to foster a monopoly, . . . .” Mr. Justice Pomeroy concedes that the “unlimited scope” *611of a covenant can suggest “an abuse of superior bargaining power and a callous disregard for an employee’s interest in pursing his chosen occupation.” Such “deliberate overreaching” should be struck down in its entirety according to Mr. Justice Pomeroy.
I agree with these principles, but I disagree with the conclusion that the covenant in this case was reasonable when made. The covenant in this case clearly contained “gratuitous overbreadth” which was bound to be oppressive to the employee from the moment it was made. It also clearly disregarded by its terms, from the moment it was made, the employee’s interest in “pursuing his chosen occupation.” The terms of the covenant were absolutely not necessary for the protection of the employer.
The covenant at issue reads as follows:
“That the Employee agrees during the term of this contract, and for a period of two (2) years thereafter, that he will not be engaged in the same or similar type of business as the Employer is engaged in, in any area of which Richmond, Virginia, is the southern point, Pittsburgh, Pa., the western point, and' Boston, Massachusetts, the northern point, and should he do so, the Employer shall be entitled to an injunction to be issued by any Court of competent jurisdiction enjoining and restraining the Employee and each and every other person, firm, associates or corporations concerned therein from the continuance of such employment, service or other acts in aid of the business of such rival company or concern.”
Neither the majority opinion, nor the concurring opinion, have focused on the terms of the above covenant. Under the covenant, the employee promised “that he will not be engaged in the same or similar type of business as the Employer is engaged in . . .” in a certain described area. This covenant bars the employees from pursuing a similar occupation even if he does so in an *612area of the described territory where the employer does no business at all. In addition, as the trial court held, the territory described in the covenant included some states, cities, and counties where the employee himself never worked. For this reason, the trial court refused to enforce the covenant in the states of New York, New Jersey, Delaware, and Massachusetts; in the city of Philadelphia, Pennsylvania; and in the counties of Berks, Chester, Delaware, and Montgomery, Pennsylvania.
Whether a restrictive covenant is an illegal restraint of trade must be determined both at the time the covenant is made and also at the time it is to be enforced. If the covenant is unreasonable when made, the illegal restraint begins immediately not when the employee ceases employment. Such a covenant perpetually hovers over the employee, who must act at his peril when considering termination of employment because he does not know whether he will be faced with a law suit challenging his right to obtain new employment, and if challenged by a law suit, whether he will suffer economic harm because a court determines ex post facto that he violated a covenant, the limitations of which were not clearly spelled out until after a burdensome and costly law suit. Thus, an employee faced with a covenant barring him from competing anywhere with a former employer lives under a constant threat that if he finds new employment, even in an area not covered by his present employer, he will be faced with litigation. A covenant that is unreasonable when made has the effect of illegally restraining trade from that moment, for it is then that it begins its coercive effect on the employee’s freedom of choice.
The covenant in this case not only prohibited solicitation of the employer’s customers, see Bettinger v. C. Berke Assoc., Inc., 455 Pa. 100, 314 A.2d 296 (1974), but also prohibited the employee from soliciting entirely new customers in geographic locations where he had never worked for the employer.
*613How was the appellant to know the breadth of the freedom of choice which he had during the term of his employment with the appellee before the handing down of the majority’s opinion?
The majority says that an employer should be allowed to write a covenant covering its entire territory because it may not know where the employee will be assigned during the term of his employment. The majority implies that the employer is helpless to do otherwise under such circumstances. That argument simply doesn’t hold water. All that an employer need do is write a covenant specifying that the employee will not be permitted to compete by soliciting any of the employer’s former customers, or perhaps, that the employee will not be permitted to compete in any city, or specific area, in which the employee has worked for the employer. Drawing such a covenant is not a difficult matter. The employee then, during the course of his employment, would know exactly what limitations have been placed on his freedom of choice should he decide to terminate his employment. In the present case, had the covenant been written to prohibit the employee from soliciting former customers, or from competing in the cities or areas where he had worked, the employee would have known that he was free to terminate his employment and engage “in the same or similar types of business” in many places which were illegally included in the present covenant.
The view I have taken presents no unrealistic burden on employers, yet at the same time avoids illegal restraints of trade when covenants are made and when enforcement is sought. If an employer is truly concerned only about protecting its interest, there is no threat to it in writing a covenant that is reasonable when made. The covenant in this case contained restrictions not necessary for the protection of the employer. Restrictions prohibiting the employee from engaging in business in certain territories, whether or not the employee ever did *614business in those territories, or whether or not he ever came in contact with customers of his present employer, were not necessary for the protection of the employer. The covenant therefore was an illegal restraint of trade.
Furthermore, a restrictive covenant, even if reasonable when made, would not be entitled to enforcement if at the time enforcement is sought, it would be unreasonable to give effect to the covenant. Circumstances may change during the employee’s term of employment. The employee’s work territory may have been reduced during the term of his employment. The employer’s need for protection may have diminished. Thus, a restrictive covenant might be reasonable in time and territory at the time executed, but unreasonable when enforced. It could well be that under such circumstances enforcement of the original covenant serves no protective purpose for the employer. A covenant, unreasonable when made, however, cannot be cured by changed circumstances because to do so would sanction the illegal restraint of trade limiting the employee’s freedom of choice during the term of his employment.