SW Legal studies in Business

Covenant Not to Compete for Two Years Held Enforceable
Description

Appeals court held that a two-year restriction on working in competition with a former employer was reasonable given the special knowledge held by the former employee and the investment the former employer had made in providing specialized training for the employee.

Topic Employment Law
Key Words

Covenant Not to Compete; Enforcement

C A S E   S U M M A R Y
Facts

Zambelli Fireworks is one of the oldest and largest fireworks companies in the U.S. and operates in most of the country. Pyrotecnico F/X is a direct competitor. Wood works in the industry as a pyrotechnician and choreographer, executing fireworks displays in combination with music. He began work for Zambelli in 2001. His employment contract contained a two-year non-compete provision that also restricted the use of trade secrets. At Zambelli, he developed his skills and was privy to many of the inner workings of Zambelli's business, including pricing, contract terms, supply sources, and client lists. In 2008, Wood was offered a new contract with expanded responsibilities. Not caring for company management, Wood contacted Pyrotecnico about employment and the parties came to an agreement. Knowing of the agreement at Zambelli, Pyrotecnico offered to pay Wood's salary for two years in case he was not allowed to work and also offered to cover litigation expenses. Wood quit Zambelli and went to work for Pyrotecnico and avoided using information covered by the non-compete agreement. He trained employees and assisted in background work on fireworks shows. Zambelli sued Wood and Pyrotecnico to enforce the non-compete agreement. The district court upheld the agreement and outlined the work areas in which Wood could not perform for two years. Wood and Pyrotecnico appealed.

Decision

Affirmed. Although restrictive covenants are a disfavored restraint on trade under Pennsylvania law, they are enforceable in equity when they are incident to the employment relationship between the parties, the restrictions imposed by the covenant are reasonably necessary for the protection of the employer, and the restrictions imposed are reasonably limited in time and place. Zambelli has a legitimate business interest in protecting its customer goodwill and in the specialized training, knowledge, and skill acquired by an employee at the employer's expense.

Citation Zambelli Fireworks v. Wood, 592 F.3d 412 (3rd Cir., 2010)

Back to Employment Law Listings

©1997-2010 South-Western Legal Studies in Business, A Division of Cengage Learning. All Rights Reserved.