An Unreasonably Broad Restrictive Covenant Is Unforceable
In the business litigation appellate case of Lehigh Anesthesia Ass’n vs. Mellon, PICS Case No. 16-0570 (Pa. Super. April 26 2016) the Honorable Susan Peikes Gantman, writing on behalf of the Pennsylvania Superior Court, ruled that trial court properly granted summary judgment to fired nurse anesthetist in former employer’s actions to enforce restrictive covenant in employment agreement, because the reach of the covenant was broader than necessary to protect employer’s business interests, and the unlimited geographical scope of the covenant placed an undue hardship on nurse in terms of finding potential future employment.
A certified nurse anesthetist worked for employer and signed employment agreement that contained a restrictive covenant. After the nurse was fired in 2011 he went to work for another company the provided anesthesia services. In 2013, his former employer filed a complaint alleging breach of covenant. The nurse answered with a new matter and counterclaims, then filed a motion for summary judgment, which the trial court granted. The nurse then discontinued his counterclaim. Former employer appealed.
On a appeal the former employer argued that the trial’s court reliance on Insulation Corp of America vs. Bobston was misplaced and asserted that employer’s firing of the nurse did not prohibit the employer as a matter of law, from enforcing the restrictive covenant. The former employee also asserted that the restrictive covenant did prohibit the nurse from practicing his profession within a certain geographic area but that only prohibited him from practicing at one of the 40-plus offices or facilities under contract with the former employer or that had been under contract with the former employer during the four year period before the nurse termination. The record supported trial court’s ruling. The covenant issue contained terms that were both ambiguous and overly broad or unreasonable. It specifically prohibited the nurse from rendering anesthesia services to the employers’ former or current clients dating back to 2008.
It also defined “clients” as anyone for whom former employer performed billable services within 48 months of the nurses termination. However former employer wanted to interpret “clients” to include businesses which conducted business with current or prior clients of the employer, even if those businesses had not been direct clients of the former employer. There was no indication that the parties had intended the covenant to restrict the nurse by restricting his new employer. The reach of covenant was broader than necessary to protect the former employer’s business interests and placed an undue hardship on the nurse in terms of finding potential future employment, especially coupled with unlimited geographical scope of covenant.
Reference: Digest of Recent Opinions, Pennsylvania Law Weekly, 39 PLW 445 (May 10, 2016)
Filed Under: Business Litigation; Restrictive Covenants; Unreasonably Broad; Undue Hardship
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