Court Affirms Preliminary Injunction to Enforce Bargained-for Noncompete Agreement

Takeaway: Some courts seem increasingly wary of enforcing noncompete agreements because they are often seen as too broadly drawn and unfairly disadvantaging to former employees. Employers should take note that courts may be more likely to enforce a noncompete agreement that is reasonable in scope and the product of a bargained-for exchange.

A preliminary injunction issued to enforce a noncompete agreement between a pest control company and its former employee was upheld by the Supreme Court of Rhode Island. A 2021 modification to the terms of employment requiring employees to receive the COVID-19 vaccination or terminate their employment did not constitute a breach of contract nor relieve the employee of his obligations under the noncompete agreement, the court found.

When hired as a pest control operator in 2011, the defendant entered into a noncompete agreement as a condition of employment. The agreement was updated in 2020 when his employer agreed to train and qualify the defendant as a licensed exterminator and provided him access to its list of customer accounts. In return, the defendant promised that, in the event he ceased working for the pest control company, he would not solicit business or perform services for the employer’s former or current customers for 2 years.

The employer issued an updated employment policy in September 2021, requiring all employees to either receive the COVID-19 vaccination or terminate their employment relationship. Employees were given an opportunity to seek an exemption on medical or religious grounds. The defendant expressed his opposition to the vaccination policy to his supervisors during a loud conversation in which he used profanities. The parties dispute whether the defendant resigned at this time, but the employer subsequently informed the defendant that he could not resume his employment based on the way he had conducted himself in the meeting.

One month later, the plaintiff discovered that the defendant had contacted its former clients and performed pest control services for them in violation of his noncompete agreement. The pest control company sent the defendant a cease-and-desist letter directing him not to violate the noncompete agreement. The defendant denied any violation of the agreement. The plaintiff filed a complaint seeking to prevent him from violating the noncompete agreement. The defendant counterclaimed, alleging that his former employer improperly terminated him in breach of his employment agreement due to his refusal to receive the COVID-19 vaccination.

The superior court, finding the defendant had entered a valid, enforceable noncompete agreement and the plaintiff had sufficiently demonstrated a likelihood of success on its claim that the defendant had breached that agreement, granted a preliminary injunction to prevent the defendant from violating the noncompete agreement. The court enjoined the defendant from performing any pest control services for the plaintiff’s prior or current customers for 2 years, using the plaintiff’s proprietary and confidential business knowledge, and soliciting the plaintiff’s prior or current customers for 24 months.

On appeal, the Supreme Court of Rhode Island considered whether the trial court erred in determining that the plaintiff demonstrated a likelihood of success on the merits of its claim that the defendant breached a valid, enforceable noncompete agreement. It began its analysis by noting that before granting a preliminary injunction, a trial justice must consider whether the party seeking an injunction has a reasonable likelihood of success on the merits of its claim; will suffer irreparable harm if the court refuses to grant the injunctive relief; has the balance of equities, which includes an analysis of the possible hardships to each party and the public interest; and has demonstrated that a preliminary injunction will preserve the status quo.

In this case, the court found that the contractual provision is ancillary to an otherwise valid employment relationship, that the contract is reasonable and that it did not extend beyond what is apparently necessary to protect the party receiving the provision’s benefit.

“The noncompetition agreement at issue is a product of a lawful, bargained-for exchange based on defendant’s at-will employment relationship with the plaintiff: in consideration for continued employment with plaintiff, as well as plaintiff’s promise to train and qualify [defendant] as a licensed exterminator in Rhode Island, [defendant] agreed not to solicit business from, or perform pest control services for, any of plaintiff’s current or former clients for a period of 24 months,” the court said. “It is undisputed” that the defendant signed the agreement and subsequently breached it by communicating with and performing work for the plaintiff’s clients.

Further, the court noted that the noncompete agreement is reasonable in scope and doesn’t extend beyond what is necessary to protect the plaintiff’s interests. “Specifically, it limits its prohibition to a 24- month period, and extends only to plaintiff’s current and previous clients, rather than to a geographic area.”

The court said it was satisfied that the trial justice appropriately found that the plaintiff successfully demonstrated a likelihood of success on the merits of its breach of contract claim.

The court found the dispute as to whether the defendant was terminated or left of his own volition immaterial to the enforcement of the agreement and rejected the defendant’s argument that an involuntary termination would preclude enforcement of the agreement.

“The plain language of the noncompetition agreement prohibits [the defendant] from violating its terms upon his termination from employment,” the court said. “There is no limiting language that conditions applicability on the circumstances of the termination from employment, whether voluntary or involuntary. As an at-will employee, plaintiff had the ability to terminate him at any time and for any lawful reason.”

In response to the defendant’s argument that his employer improperly terminated his employment based on the religious nature of his opposition to receiving the COVID-19 vaccine, the court noted that the defendant had declined the opportunity to apply for a religious exemption and also listed several nonreligious reasons for his opposition to the policy. Further, the court emphasized that other employees had applied for and received a faith-based exemption to the vaccination policy.

The court concluded that the trial court “supportably found” that the plaintiff would suffer irreparable harm due to the defendant’s ongoing interference with its business and that the equities tipped in the plaintiff’s favor because this “ongoing loss of customer goodwill outweighs [the defendant’s] preference to perform pest control services for plaintiff’s clients.” Finally, the court said the trial court hadn’t erred in finding that preventing the defendant from continuing to serve the plaintiff’s clients would uphold the status quo.

Concluding that the plaintiff presented a prima facie case in favor of a preliminary injunction and that the trial justice did not abuse her discretion by granting a preliminary injunction, the court affirmed the order.

Griggs & Browne Pest Control Co. v. Walls, R.I., No. 2022-356-Appeal (Jan. 8, 2024).

Rosemarie Lally, J.D., is a freelance legal writer based in Washington, D.C.