D began working for P and signed a written Employment Agreement which contained a covenant not to compete.
The covenant said that employment could be terminated by either side on 30 days' notice and that D could not practice small animal medicine for a period of 3 years from the date of termination within 5 miles of the corporate limits of Laramie, WY.
P heard that D was looking to buy a competing veterinary practice in town.
P drafted a letter offering to let the D out of the non-compete clause for $40k.
D denied looking to buy a business; P fired D. D then purchased a competing practice and worked on both small and large animals.
P sought injunctive relief and damages for breach.
Procedural History:
Lower court found that the covenant was enforceable, barred D from practicing on small animals, awarded no damages.
WY Supreme Court affirmed it was enforceable, changed duration of non-compete clause to one year.
Issues:
What analysis should a court use to determine if an agreement not to compete should be enforced?
Holding/Rule:
A valid and enforceable covenant not to compete requires a showing that the covenant is…
In writing
Part of a contract of employment
Based on reasonable consideration
Reasonable in durational and geographic limitations
Not against public policy
Reasoning:
The principles of freedom of contract and freedom to work conflict in the formation of agreements not to compete.
The enforceability of a covenant not to compete depends upon a finding that the proper balance exists between the competing interests of the employer and employee.
A restraint is reasonable only if it is no greater than is required for the protection of the employer, does not impose undue hardship on the employee, and is not injurious to the public.
Enforcement of this covenant does not create an unreasonable restraint on trade; she can still work on large animals.
The public will not suffer injury from enforcement since her skills are not unique or uncommon.
The geographical limit is not unreasonable since the county is large enough to where she could move outside of this radius to practice.
There is not a reasonable relationship between the three year durational requirement and the protection of P's special interests. Most clients will be able to decide after a year where they want to have service done.
Dissent:
D beat the system; she signed an agreement with a 3 year duration, broke it, and is now free and clear to do what she wants since the one year time frame has already passed.
