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THE SUPREME COURT OF NEW HAMPSHIRE
___________________________
Rockingham
No. 98-701
NATIONAL EMPLOYMENT SERVICE CORPORATION
v.
OLSTEN STAFFING SERVICE, INC.
August 15, 2000
Rath, Young and Pignatelli, P.A., of Concord (Andrew W. Serell on the brief) and Day, Berry & Howard, LLP, of Boston, Massachusetts (Jason W. Morgan on the brief and orally), for the defendant.
Coughlin, Rainboth, Murphy and Lown, P.A., of Portsmouth (Bradley M. Lown on the brief and orally), for the plaintiff.
GROFF, J. The plaintiff, National Employment Service Corporation (National), alleged that the defendant, Olsten Staffing Service, Inc. (Olsten), violated a restrictive covenant in an employment contract between National and its employees and intentionally interfered with National's contractual relationship with its employees. Following a jury trial in the Superior Court (Galway, J.), National was awarded damages in excess of $20,000. On appeal, Olsten argues that the trial court erred in: (1) determining that the restrictive covenant was reasonable and enforceable; (2) failing to direct a verdict in its favor on National's claim of intentional interference with contractual relations; and (3) refusing to overturn jury verdicts that were conclusively against the weight of the evidence. We reverse.
National and Olsten are in the business of supplying temporary employees to industry. Prior to August 1994, National, Olsten, and several other temporary employment agencies supplied light industrial laborers to Watts Fluid Air Corporation (Watts) at its manufacturing facility in Kittery, Maine. National required its employees to sign employment contracts prior to commencing employment containing a restrictive covenant, which prohibited them from accepting "employment directly or indirectly at client company for a period of ninety working days following the termination of employment with National . . . ." Watts was considered a client company. In August 1994, Watts named Olsten as its exclusive, on-site, temporary employee provider. Olsten agreed, however, to permit National employees to continue their assignments at Watts.
In January 1995, the parties discussed a potential lay-off of National's employees, and a dispute arose as to the validity of any such lay-off. At that time, National informed Olsten of the restrictive covenant in its employees' contracts and warned Olsten that the contracts prohibited "agency jumping." On March 3, 1995, Olsten posted a bulletin at Watts informing employees that Watts would no longer be affiliated with National and that National employees who wished to remain at Watts could apply for a position through Olsten. Seven National employees applied to Olsten and were hired. Each employee had signed the employment contract containing the restrictive covenant prior to commencing an assignment at Watts.
National brought claims against Olsten for, among other things, breach of contract, intentional interference with contractual relations, and quantum meruit. At trial, Olsten moved to dismiss National's claim for intentional interference with contractual relations, which the court denied.
The jury returned a defendant's verdict on the breach of contract claim, but awarded National $11,882.01 on its quantum meruit claim and $8,750 on its claim for intentional interference with contractual relations. Olsten's motion to set aside the jury verdicts and for a new trial was denied. This appeal followed.
Olsten first argues that the restrictive covenant in National's contracts with its employees is unreasonable and unenforceable.
The public policy of New Hampshire encourages free trade and discourages covenants not to compete. Nevertheless, our courts uphold a limited restraint if reasonable as applied to the particular circumstances of the parties. A restraint on employment is reasonable only if it is no greater than necessary for the protection of the employer's legitimate interest, does not impose undue hardship on the employee, and is not injurious to the public interest.
Concord Orthopaedics Prof. Assoc. v. Forbes, 142 N.H. 440, 442-43, 702 A.2d 1273, 1275 (1997) (citation and quotation omitted). If a covenant violates any prong of the reasonableness test, it is unreasonable and unenforceable. See id. A covenant's reasonableness is a matter of law for this court to decide. See Technical Aid Corp. v. Allen, 134 N.H. 1, 8, 591 A.2d 262, 265 (1991).
"Covenants are valid only to the extent that they prevent employees from appropriating assets that are legitimately the employer's." Concord Orthopaedics, 142 N.H. at 443, 702 A.2d at 1276.
Legitimate interests of an employer which may be protected from competition include: the employer's trade secrets which have been communicated to the employee during the course of employment; confidential information communicated by the employer to the employee, but not involving trade secrets, such as information on a unique business method; an employee's special influence over the employer's customers, obtained during the course of employment; contacts developed during the employment; and the employer business's development of goodwill and a positive image.
54A Am. Jur. 2d Monopolies, Restraints of Trade and Unfair Trade Practices