Opinion
CIV. NO. 3:05CV1960 (AHN).
September 5, 2006
RECOMMENDED RULING ON MOTION FOR PRELIMINARY INJUNCTION
Kelly Services, Inc. ("Kelly") seeks a preliminary injunction against Anna Savic ("Savic"), Kelly's former legal recruiter, to prevent her from violating the non-compete and confidentiality provisions of her 1990 Employment Agreement by working for her new employer, Response Legal Search, a competitor of Kelly.
Since the injunction hearing has not been consolidated with a trial on the merits, the only issue pending is whether a preliminary injunction should enter. For the reasons that follow, the Motion for Preliminary Injunction [Doc. #30] is DENIED.
Testimony and evidence adduced at the hearing are summarized below as necessary to explain the Court's findings and conclusions.
I. FINDINGS OF FACT
Based on the credible testimony, the exhibits, and the entire record developed during the evidentiary hearings on June 13 and 14, 2006, the Court finds the following facts established for the purposes of the injunction proceedings.Id. Id. Savic's Employment History Id. 1990 Employment Agreement Id. Id. paralegal paralegals Id. Id. Id. Id. Id. Id. Id. This agreement may be amended at any time, but any such amendment must be in writing, signed by Shelly Wallace, on behalf of The Wallace Law Registry Id. Id. Sale of The Wallace Law Registry 2000 Employment Agreement with Kelly Corporations 1. Kelly Services, Inc. is a corporation organized and existing under the laws of Delaware with its principal place of business in Troy, Michigan [Compl. ¶ 2]. 2. Kelly Services, Inc. has been a leader in the staffing industry for over fifty (50) years [Doc. #32, Ex. A, ¶ 3]. 3. Kelly in Hartford does business as Kelly Law Registry, a legal placement firm specializing in the placement of legal professionals in both permanent and temporary assignments with law firms and corporate legal departments. 4. The Hartford office of Kelly Law Registry specializes in placement of candidates with clients in the greater Hartford legal community. 5. Anna Savic is an honors graduate (summa cum laude) from Quinnipiac University with a B.A. in paralegal studies. She holds a M.B.A. from Rensselaer at Hartford. [Savic Depo. at 142]. 6. Savic began working for the Wallace Law Registry in West Hartford in February 1989 as a legal recruiter with primary responsibility for recruiting and placing paralegals. Six months earlier, Savic had started a company to place paralegals; she then received a call from Shelly Wallace to join her firm. 7. Savic testified that, at the time she was hired by Shelly Wallace, there were only three (3) employees at The Wallace Law Registry: Shelly Wallace, Lauren Cedar and herself, plus a part-time clerical person. Plaintiff stated that Wallace and Cedar didn't know anything about paralegal placement when Savic was hired, that she was hired to make temporary and permanent paralegal placements. She testified that Shelly Wallace believed that attorneys should make attorney placements and paralegals should make paralegal placements. 8. Savic's responsibilities at The Wallace Law Registry eventually expanded to include recruiting and placing attorneys as well as paralegals. [Savic Aff. ¶ 4]. 9. Savic tendered her resignation to Kelly Law Registry on May 12, 2005, with an effective termination date of May 27, 2005. [Doc. #32, Ex. G, Doc. #34, Ex, D]. 10. Savic was hired by Response Legal Search as Managing Director on October 31, 2005. [Doc. #32, Ex. B. Savic Depo. at 7-8, Ex. G]. Response is a legal placement agency located in Hartford, Connecticut. at 11. 11. On October 2, 1990, Ms. Savic signed an Employment Agreement with Shelly Wallace, Esquire. [Doc. #32, Ex. A at Ex. 2]. 12. The Agreement starts, "[b]y way of this letter, I would like to set forth the terms and conditions of our agreement concerning your employment by The Wallace Law Registry." 13. The Agreement at paragraph three states, You agree that as an employee of The Wallace Law Registry, your employment is at-will, which means that either you or The Wallace Law Registry can terminate the employment relationship at any time, with or without cause. [Doc. #32, Ex. 2]. 14. The Agreement at paragraph four states, You agree to devote your time, energies and attention exclusively to the business of The Wallace Law Registry and to no other similar or competing business during the course of your employment. 15. The Agreement at paragraph five state, You will receive a commission of 40% on the fees collected by The Wallace Law Registry as a result of any permanent or temporary placement of a referred by you and for that position, exclusive of United Technologies wherein you will be paid 30% on fees collected as a result of any temporary or permanent placement of referred by you for that position. (emphasis added). 16. The Agreement at paragraph eight states, You further understand and acknowledge that The Wallace Law Registry uses trade secrets, proprietary and other confidential information in the course of its business, including but not limited to, its applicant database, client information file, prospective client lists, clients lists, prospective acquisitions and other dealings, employee lists and records and financial records, and other information regarding both clients and applicants, including contacts, names, addresses, qualifications and fee arrangements, and other information regarding the clients or applicants of The Wallace Law Registry and other information regarding The Wallace Law Registry's management and organizational systems and methods, The Wallace Law Registry's data processing systems, methods and data, training materials, sales figures, projections and plans, strategic plans and reports and personnel information. In the course of performing your duties on behalf of The Wallace Law Registry, you will be permitted access to some or all of this trade secret, proprietary and confidential information and you agree to use this information only as required to perform your duties on behalf of The Wallace Law Registry. You further agree that all such information shall be treated as private, privileged and confidential and further agree that you shall not disclose or release any of such information to any person, firm or institution, at any time during your employment by The Wallace Law [sic] or after the termination of your employment, whether the termination is involuntary or voluntary. 17. The Agreement at paragraph nine states, You further agree that, upon the termination of your employment with The Wallace Law Registry, whether voluntary or involuntary, you agree to immediately return to The Wallace Registry any lists, books, records, indices, tapes, computer software, discs or materials, or any other papers, documents or materials of whatever kind or nature which refer or relate in any way to The Wallace Law Registry or the business of The Wallace Law Registry. You acknowledge and agree that all client and applicant records generated by you during your employment becomes the sole and exclusive property of The Wallace Law Registry. 18. The Agreement at paragraph ten states, You also agree that, during your employment with The Wallace Law Registry and for a period of two years following any termination, whether voluntary or involuntary, you will not, on behalf of yourself or on behalf of any other person, firm, or corporation, call on or solicit in any manner any applicants of The Wallace Law Registry nor any clients, as defined below, of The Wallace Law Registry nor any clients, as defined below, of The Wallace Law Registry, without my express written consent. An "applicant" is defined as any "individual who has, at the time of your termination, submitted an application which is in the active database of the Registry." A "client" is defined as "any corporation, law firm or individual with which the Registry has, at the time of your termination, an agreement to perform placement services or for which the Registry has performed and received (or is due) a commission for any placement, counseling, or consulting services within two years prior to your termination." All such clients are identified on the "Client List" maintained and updated by The Wallace Law registry. Without limiting the foregoing, you are, of course, not precluded from contacting such persons (nor are they precluded from contacting you) for the purpose of attempting to secure employment in paralegal or administrator services or as an in-house placement director as long as The Wallace Law Registry's resumes and applicants are treated fairly by you in your position and the client relationship is maintained within the parameter of your being free to exercise your reasonable business judgment on behalf of your new employer's best interest, or any other position not in conflict with services provided by The Wallace Law Registry. 19. The Agreement at paragraph eleven states, You further agree that, during the term of your employment with The Wallace Law Registry and for a period of two years following the termination of your employment, whether voluntary or involuntary, you will not, on behalf of yourself or on behalf of any other person, firm, or corporation, solicit any employee from The Wallace Law Registry to leave the employ of The Wallace Law Registry to become employed for any person, firm or corporation engaged in competition with The Wallace Law Registry. 20. The Agreement at paragraph twelve states, You also agree that for a period of two years following the termination of your employment, whether voluntary or involuntary, you will not directly or indirectly engage in, enter the employment of, or render services to any other person or entity engaged in the same or substantially similar business as conducted by The Wallace Law Registry within a 25 miles radius of Hartford. You agree that these restrictions are reasonable and further agree that, in the course of your employment, you have had access to such information and data regarding The Wallace Law Registry, should it be utilized by you, would result in irreparable harm to The Wallace Law Registry. 21. The Agreement at paragraph thirteen states, You acknowledge that you have received an additional 5% commission as consideration for entering into agreements set forth above. You will also receive for a period of two years upon involuntary termination of your employment without cause an additional payment of $500.00 a month minus applicable deductions and withholding taxes. If I decide not to enforce the covenant at any time during those two years, I will inform you by written notice of that selection two months in advance, in which case all payment will cease. In the event that your employment has been voluntarily terminated or terminated for cause, you will not receive any payments but you agree to abide to the agreements set forth above. You acknowledge that any breach by you of these agreements, will cause immediate and irreparable harm to the business of The Wallace Law Registry and will entitle The Wallace Law Registry to an immediate injunction and other equitable relief. Notwithstanding the foregoing, nothing herein shall prevent the Wallace Law Registry from pursing any legal remedy available for breach of theses agreements, including, but not limited to, an action for damages, punitive damages, attorney's fees and costs. 22. The Agreement at paragraph sixteen states, This agreement contains the entire agreement between the parties and supersedes all prior negotiations, understandings and agreements between the parties, whether written or oral. . (emphasis added). 23. The Agreement closes with the following two unnumbered paragraphs, If you have any questions after reviewing this agreement, please discuss them with me. If this agreement is acceptable to you, please sign the original and return it to me. By signing below, you indicate that your acceptance of an agreement to be bound by each and every term and provision of this agreement. I look forward to receiving your signed contract and look forward to continuing our long and mutually beneficial relationship. 24. Savic testified that she had no time to consult with an attorney prior to signing the agreement. She recalled that she considered the document for fifteen (15) minutes before signing. She gave birth to a daughter four days later. [Savic Depo. at 141]. 25. Savic testified that The Wallace Law Registry was a sole proprietorship in October 1990 and Shelly Wallace was the only person involved in the business. 26. Plaintiff testified that she was paid on a strict commission basis and payment was made only after the client paid The Wallace Law Registry. 27. On April 25, 1995, Kelly Professional and Technical Services, Inc., a Delaware corporation, (the "Buyer") and Shelly Wallace (the "Shareholder"), being the holder and owner of 100% of the outstanding capital stock of The Wallace Law Registry, Inc., a Connecticut corporation, (the "Company") entered into a Stock Purchase Agreement. [Doc. #32, Ex. C]. 28. Among the assets purportedly acquired by Kelly Professional and Technical Services, Inc. was the Employment Agreement between Anna Savic and The Wallace Law Registry dated October 2, 1990. [Doc. #32, Ex. C, Sched. 3.14 "Contracts", Pt. II]. 29. Section 3.14 states in relevant part, "Schedule 3.14 also lists all agreements, contracts or arrangements, written or oral, between the Company and the Shareholder or any corporation or business entity controlled by the Shareholder. Each person listed on Schedule 3.14, Part II has executed and delivered confidentiality and/or non-competition agreements in a form which Shareholder believes protects the Company and all such agreements are in full force and effect." [Doc. #32, Ex. C, § 3.14]. 30. Section 3.15 states in relevant part, "True and complete copies of al employment contracts covering the employees listed on Schedule 3.15.1 have been delivered to the Buyer. Neither the Company nor the Shareholder has received any notices and has no reason to believe that any of such employees may terminate their employment with the Company in the foreseeable future or as a result of the sale and purchase of the Shares under this Agreement. [Doc. #32, Ex. C, § 3.15]. 31. With the purchase of The Wallace Law Registry stock by Kelly Professional and Technical Services, Inc. in April 1995, The Wallace Law Registry continued to do business under that name. Shelly Wallace remained with the company through 1998. 32. On February 16, 1999, The Wallace Law Registry filed a business name change to The Law Registry, Inc. [Doc. #32, Ex. D]. 33. On December 21, 1999, Kelly Professional and Technical Service, Inc. a Delaware corporation ("Parent") entered into a Plan and Agreement of Merger with The Law Registry, Inc., a Connecticut corporation ("Subsidiary"). The Agreement states that "Parent and Subsidiary desire and believe that it is in their respective best interests that Subsidiary be merged into Parent, with the separate corporate existence of Subsidiary ceasing upon the effective date of the merger." [Doc. #32, Ex. E]. 34. A Certificate of Ownership was recorded with the Office of the Secretary of State for the State of Delaware with an effective date of January 3, 2000, memorializing the merger of "The Law Registry, Inc." with and into "Kelly Professional and Technical Services, Inc." On the same day, a Certificate of Ownership was recorded with the Office of the Secretary of State for the State of Delaware, memorializing the merger of "Kelly Professional and Technical Services, Inc." with and into "Kelly Services, Inc." [Doc. #32, Ex. F]. 35. The "Kelly Custom Employee Profile Report" for "Hartford KLR" lists Savic as a "new hire" on January 1, 1999. The Report states that Savic's years of service were 6.4 years with an employment termination date of May 28, 2005. [Pl. Ex. 20]. 36. In 2000, Savic testified that her employer asked her to sign a document entitled, "Agreement With Full-Time Employees of Kelly Corporations." [Hrg. Ex. 18]. 37. The Kelly Agreement states at paragraph 1, Unless required by my job at Kelly, I will never disclose, use, copy or retain any confidential business information or trade secrets belonging to Kelly, Kelly's customers or Kelly's suppliers. This includes customer and employee lists; sales, service, recruiting and training techniques and manuals; sales and marketing strategies; computer program; financial data and other similar information. [Hrg. Ex. 18]. 38. The Kelly Agreement states at paragraph 2, While I am working for Kelly, I will not solicit any of Kelly's customers or employees for a competing business, and I will not compete against Kelly or associate myself with any Kelly competitor as an employee, owner, partner, stockholder, investor, agent or consultant. These same limitations apply for one year after I leave Kelly in any market area in which I worked or had responsibility during the last five years of my employment with Kelly. [Hrg. Ex. 18]. 39. Savic did not sign the Kelly Agreement. 40. Kelly took no action against Savic for refusing to sign the Agreement. 41. On March 13, 2000, Savic entered intoa new compensation agreement, entitled "Kelly Law Registry Commission Plan." The parties signed an Employee Acknowledgment that states in relevant part, "Employee has read and understands the terms of the Kelly Law Registry Compensation Plan Document. Employee further understands that this compensation plan replaces any previous compensation plan(s) including any plan(s) as outlined in previous employment agreements(s) and/or addendums to employment agreements . . . The acknowledgment of this compensation plan document shall not be deemed a "previous employment agreement" for purposes of Kelly's Agreement With Full-Time Employees." [Doc. #34, Ex. B].II. CONCLUSIONS OF LAW
In considering the plaintiff's application for preliminary injunction, the Court must decide whether the 1990 Employment Agreement between The Wallace Law Registry and Anna Savic is unenforceable as to Kelly Services because it lacks an assignment clause; and, if so whether Kelly has an enforceable agreement with defendant Savic.The parties agree that to obtain a preliminary injunction, Kelly Services must show (1) irreparable harm and (2) either (a) a likelihood of success on the merits or (b) the existence of sufficiently serious questions on the merits to make them a fair ground for litigation, combined with a balance of hardships tipping decidedly in its favor. Forest City Daly Housing, Inc. v. Town of North Hepstead, 175 F.3d 144, 149 (2d Cir. 1999).
Applying the legal standard to the facts of the case, the court finds that the application for preliminary injunction should be denied because plaintiff has failed to establish a likelihood of success on the merits.
An Employment Agreement is Assignable in Connecticut
Defendant first argues that the 1990 Employment Agreement between The Wallace Law Registry and Anna Savic, is unenforceable as to Kelly Services because it lacks an assignment clause.
As set forth above, the 1990 Agreement applies to two parties: Shelly Wallace, Esquire, and Anna Savic "concerning [Savic's] employment at The Wallace Law Registry." The Agreement is personal in tone and uses the personal pronouns "I" or "me" or "my" throughout the agreement to refer to Shelly Wallace the founder of The Wallace Law Registry and the signatory to the Agreement. See 1990 Agreement at ¶¶ 1, 10 (consent to solicit), 13 (enforcement of non-compete covenant), 16 (amendments) and opening and closing paragraphs. Ms. Wallace did not sign the Agreement as a corporate officer, but as "Shelly Wallace, Esquire." The opening paragraph states, "[b]y way of this letter, I would like to set forth the terms and conditions of our agreement concerning your employment by The Wallace Law Registry." The Agreement is silent on assignability and/or successorship.
For example, in paragraph 13, Shelly Wallace has the authority to decide not to enforce the covenant not to compete. At paragraph 16, it states that any amendment to the Agreement "must be in writing, signed by Shelly Wallace, on behalf of The Wallace Law Registry."
On April 25, 1995, Kelly Professional and Technical Services purchased all of the issued and outstanding capital stock of The Wallace Law Registry and the company's and shareholder's representations and warranties. Included in those representations and warranties was Savic's employment agreement. [Doc. #32, Ex. C, §§ 3.14, Sch. 3.14, Part II, "Each person listed on Schedule 3.14, Part II has executed and delivered confidentiality and/or non-competition agreements in a form which Shareholder believes adequately protects the Company and all such agreements are in full force and effect."]. Savic's contract is listed on Schedule 3.14 of the Agreement. Neither The Wallace Law Registry or Kelly Professional and Technical Services, Inc. obtained Savic's written consent to the assignment. Following the stock purchase, Savic continued her employment as an at-will employee.
In 2000, Kelly asked Savic to sign an Employment Agreement, entitled "Kelly's Agreement With Full-Time Employees," which contained confidentiality and non-compete provisions. Savic refused to sign the agreement.
In construing an employment contract, the ordinary rules of contract interpretation apply. Slifkin v. Condec Corp., supra, 13 Conn. App. at 544. "Any ambiguity in a contract must emanate from the language used in the contract rather than from one party's subjective perception of the terms." HLO Land Ownership Associates, Ltd., Partnership v. Hartford, 248 Conn. 350, 356-57 (1999) (Citation omitted; internal quotation marks omitted.).
Under Connecticut law, the standard of review in contract interpretation cases is well established. "Although ordinarily the question of contract interpretation, being a question of the parties' intent, is a question of fact . . . [w]here there is definitive contract language the determination of what the parties intended by their contractual commitments is a question of law. . . ." Tallmadge Bros., Inc. v. Iroquois Gas Transmission System, L.P., 252 Conn 479, 495-96 (2000) (quoting Issler v. Issler, 250 Conn. 226, 235-36 (1999)).
In the case of Pesino v. Atlantic Bank of New York, 244 Conn. 85, 91-92 (1998), the Supreme Court of the State of Connecticut summarized the general principles governing the interpretation of contracts as follows:
A contract must be construed to effectuate the intent of the parties, which is "determined from the language used interpreted in the light of the situation of the parties and the circumstances connected with the transaction . . . The intent of the parties is to be ascertained by a fair and reasonable construction of the written words and . . . the language used must be accorded its common, natural, and ordinary meaning and usage where it can be sensibly applied to the subject matter of the contract . . . Where the language of the contract is clear and unambiguous, the contract is to be given effect according to its terms. A court will not torture words to import ambiguity where the ordinary meaning leaves no room for ambiguity . . . Similarly, any ambiguity in a contract must emanate from the language used in the contract rather than from one party's subjective perception of the terms." Lawson v. Whitey's Frame Shop, 241 Conn. 678, 686, 697 A.2d 1137 (1997). "Although ordinarily the question of contract interpretation, being a question of the parties' intent, is a question of fact . . . where there is definitive contract language, the determination of what the parties intended by their contractual commitments is a question of law." (Citations omitted; internal quotation marks omitted.) Levine v. Massey, 232 Conn. 272, 277 (1995); see Mulligan v. Rioux, 229 Conn. 716, 740 (1994), on remand, 38 Conn. App. 546 (1995); Bank of Boston Connecticut v. Schlesinger, 220 Conn. 152, 158 (1991); Thompson Peck, Inc. v. Harbor Marine Contracting Corp., 203 Conn. 123, 131, (1987); Bead Chain Mfg. Co. v. Saxton Products, Inc., 183 Conn. 266, 274-75, 439 A.2d 314 (1981).See Tallmadge Bros., Inc. v. Iroquois Gas Transmission Sys., L. P., 252 Conn 479, 498 (2000).
Savic cites to Ohio, Vermont and Oregon law in support of her argument that the 1990 employment agreement between her and The Wallace Law Registry is unenforceable by Kelly Services because it lacks an assignment clause.
When a non-compete agreement is silent about assignability, courts must give controlling effect to the intent of the parties which is primarily ascertained by determining whether the covenant employs words which indicate that assignment was contemplated and whether assignability is necessary to protect the goodwill of the business being sold.The Fitness Experience, Inc. v. TFC Fitness Equipment, Inc., 355 F. Supp. 2d 877, 889 (N.D. Ohio 2004) (applying Ohio law). "The absence of words of assignability, such as successors or assigns, is not of itself controlling but it is some evidence that the intention of the parties was against assignment." Smith, Bell, Hauck, Inc. v. Cullins, 123 Vt. 96, 101-02 (Vt. 1962) (noting disagreement with Connecticut, the Vermont Supreme Court held, "there is nothing to establish that [assignment] was contemplated or considered by the parties at the time of the agreement. In the absence of such consideration and without express authority to assign, we find no justification to extend the coverage of the covenant to an outsider whose protection was neither sought nor anticipated at the time the engagement was made."); Perthou v. Stewart, 243 F. Supp 655, 659 (D. Oregon 1965) (holding "[s]ound authority supports the view that personal service contracts . . . cannot be assigned. This rule applies even though the assignment be to a corporation or partnership with a changed membership which carries on a business substantially in the same way in which it was previously operated.").
However, "Connecticut adheres to the view, rejected by most jurisdictions, that an employee's covenant not to compete is an assignable asset of the employer." Madigral Audio Laboratories, Inc. v. Cello, 799 F.3d 814, 821 (2d Cir. 1986) (internal citations omitted) (citing Torrington Creamery Inc. v. Davenport, 126 Conn. 515 (1940)); see also Managed Health Care Assoc. Inc. v. Kethan, 209 F.3d 923, 928 (6th Cir. 2000) (finding Kentucky "recognized that noncompetition clauses may be assigned as part of the sale of a business' assets")."; Equifax Services, Inc. v. Hitz, 905 F.2d 1355, 1361 (10th Cir. 1990) ("In the case of a merger, as here, the surviving corporation automatically succeeds to the rights of the merged corporations to enforce employees' covenants not to compete."). "Where an employee enters into a restrictive covenant such as the one in this case, it becomes a valuable asset of the business and upon the sale of that business the benefits of the covenant may be assigned to the purchaser. Where, as in this case, the proprietor of the business sells it in the entirety to another, in equity the seller will be deemed to have assigned so much of the benefit of the contract as is severable and necessary for the protection of the business sold to the purchaser." Torrington, 126 Conn. at 521.
Defendant seeks to distinguish Torrington Creamery by pointing out that the case involved a contract with a successor clause. Also, the defendant's employment was terminated in Torrington Creamery by Sunny Valley Corporation, the predecessor company and original party to the contract. Defendant offers no Connecticut cases, and the Court has not found any, to suggest that the holding in Torrington has been eroded or qualified by the Connecticut courts. But see Blum, Shapiro Company, P.C. v. Searles Houser, LLC, No. CV 990586283S, 1999 WL 669824, *3 (Conn.Super.Ct. Aug. 11, 1999) (While considering Torrington Creamery, the court found that "Blum Shapiro did not acquire all of the assets of Cole Frago. The two entities did not merge and Blum Shapiro assigned no value to any covenant not to compete nor to good will in acquiring certain assets of Cole Frago. The Court concluded that Cole Frago did not intend to assign the covenants not to compete or liquidated damages provision to Blum Shapiro nor did Blum Shapiro expect to receive the covenants or damage provision."). Here, there was specific reference to Savic's employment contract as an asset of The Wallace Law Registry. The Court finds defendant's argument unavailing on the question of assignability. Is the 2000 Employment Agreement Enforceable?
Defendant urges the Court to look to the conduct of the parties to determine whether Savic is bound under the 1990 employment agreement. Savic argues that her job duties significantly changed from 1990 to 2006. In 1990, she was only responsible for placing paralegals. See 1990 Agreement ¶ 5. Over time, her job duties expanded to include temporary and permanent placement of attorneys and sales recruiting. She contends that her refusal to enter into a "new, less burdensome" non-compete agreement with Kelly in 2000 and Kelly's efforts to persuade her to sign a new agreement "further confirms that Kelly understood that the original non-compete agreement with Wallace Law Registry no longer applied." [Doc. 34 at 11]. Savic contends that these facts constitute an abandonment and recision of the 1990 Employment Agreement. In support of her contention that she is not bound by the 1990 Employment Agreement with Wallace Law Registry, defendant cites AFC Cable Systems, Inc. v. Clisham, 62 F. Supp.2d 167 (D. Mass. 1999) and F. A. Bartlett Tree Expert Co. v. Barrington, 353 Mass. 585, 587-88 (1968).
In AFC Cable Systems, Inc., the Massachusetts District Court found that the material changes in defendant's employment "coupled with AFC's repeated efforts to have Clisham sign a new non-compete agreement, make it clear that Clisham had entered a new employment relationship with AFC, thereby voiding the 1992 Agreement. That AFC wanted the protections of a non-compete agreement is manifest from its actions. AFC, however, never obtained one. While AFC was free to terminate Clisham for his refusal to sign a new Agreement, it chose instead to drop the subject and hope for the best. AFC's regrets cannot now create a binding agreement where AFC, largely by its own inaction, failed to obtain one." 62 F. Supp.2d at 173. In F. A. Bartlett Tree Expert Co., the Massachusett's Supreme Court considered the changes in the terms of employment from 1948, when the employee signed the agreement, through 1966 when the defendant terminated employment with the company. The F. A. Bartlett Tree Expert Co. Court concluded, "[i]t cannot be said, as the plaintiff argues, that the general purposes of the 1948 contract remained undisturbed by the changed in pay, work area or position . . . An examination of the 1948 contract reveals that, in addition to reference to pay, territory and position, it contains only a restrictive covenant and a termination clause. It is hard to see how changing pay and territory in 1960 and changing pay, territory and position in 1965 amount to mere modifications of the 1948 contract." Id.; see Corporate Express Office Products, Inc. v. Yesu, No. Civ. A. 3:04CV466, 2005 WL 465406, *3 (D. Conn. 2005) (finding agreement did not apply to employee's work as a sales representative, but only applied to his position as a sales manager).
In F. A. Bartlett Tree Expert Co., the defendant worked under the 1948 contract for twelve years. In 1960, the defendant's rate of compensation and sales area were changed. "At the time of theses changes the plaintiff submitted a written contract incorporating the new terms to the defendant, who refused to sign it and sent it back to the plaintiff." 353 Mass. at 587. In 1965 defendant was promoted from salesman to district sales manager and assumed new responsibilities.
On this record, the Court finds that Savic's employment duties changed so substantially from 1990 to 2005, as to alter the terms of employment. In January 1999, Savic became an official employee of Kelly. It is undisputed that, sometime in 1999, Savic was assigned to place lawyers as well as paralegals and was also allowed to do sales recruiting. Significantly, as her responsibilities broadened Savic earned more commissions, while the compensation plan itself did not change. She testified that the timing of her payment of her commissions under Kelly did change.
In January 2000, Kelly asked Savic to sign a new employment agreement, entitled "Agreement with Full-time Employees of Kelly Corporations," and a new compensation plan, entitled "Kelly Law Registry Incentive Plan." Savic testified that she refused to sign both documents. She stated that terms contained in the 2000 "Agreement with Full-time Employees of Kelly Corporations" were too onerous and that Kelly was aware of her refusal to sign the agreement. Savic also refused to sign the "Kelly Law Registry Incentive Plan," contending that the terms of this agreement would substantially reduce her compensation. Savic and Kelly did negotiate a "Commission Compensation Plan" in 2000 whereby her 40% commission rate, (with a de minimus salary), was unchanged. Savic testified that she negotiated very hard to continue this commission rate that was unique to Kelly, and refused Kelly's "Incentive Compensation Plan" that would have resulted in a significantly lower income to her for the same work. This commission rate, coupled with Savic's "super star" performance, made her the highest paid recruiter in the Hartford office and one of the highest compensated Kelly recruiters nationally.
As previously noted, the 2000 Employee Acknowledgment, signed by the parties at the time the new "commission compensation plan" was signed, states in relevant part, "[e]mployee has read and understands the terms of the Kelly Law Registry Compensation Plan Document. Employee further understands that this compensation plan replaces any previous compensation plan(s) including any plan(s) as outlined in previous employment agreements(s) and/or addendums to employment agreements . . . The acknowledgment of this compensation plan document shall not be deemed a "previous employment agreement" for purposes of Kelly's Agreement With Full-Time Employees." [Doc. #34, Ex. B]. Anna Savic added to the acknowledgment form, "Employee's commission rate of 40% will remain in place, undisturbed." Id. The Court construes this acknowledgment form as further notice to the parties that previous compensation plans, including any compensation plan contained in the 1990 Employment Agreement with Wallace, was "replaced."
On June 20, 2005, after Savic resigned from Kelly, Savic's attorney wrote to Kelly, stating in relevant part, "your letter references an alleged obligation owed by Ms. Savic to Kelly Law Registry. Nothing in the agreement Ms. Savic signed with the Wallace Law Registry imposes any obligation on her as to any successor company. Further, Ms. Savic was offered an opportunity to sign a non-compete applicable to Kelly at the time she became employed by your company and declined to do so." [Tab 13]. On June 28, 2005, Kelly asked Savic to formally reaffirm the provisions of paragraphs 10-12 of the 1990 Employment Agreement, demonstrating that Kelly was on notice that Savic did not consider herself bound under any non-compete clause. [Tab 13, 14].
Waiver consists of the intentional abandonment or voluntary relinquishment of a known right. Whether a waiver has occurred is a question of fact. . . .
Waiver involves the idea of assent, and assent is an act of understanding. Intention to relinquish must appear, but acts and conduct consistent with intention to relinquish are sufficient. Thus, waiver does not have to be express, but may consist of acts or conduct from which waiver may be implied. In other words, waiver may be inferred from the circumstances if it is reasonable to do so.Statewide Grievance Committee v. Brown, 67 Conn. App. 183, 188 (2001) (internal citations and quotation marks omitted), cert. denied, 259 Conn. 919 (2002).
On this record the Court finds that the 1990 Employment Agreement between Anna Savic and Wallace Law Registry is unenforceable by Kelly. There are undoubtedly situations where changes to an employment agreement amount to no more than modifications of the original agreement, leaving other provisions in effect. This is not such a case. Even if under Torrington Creamery the agreement were enforceable by Kelly upon its purchase of Wallace Law Registry, the Court finds that the agreement did not survive, among other things, the changes in Savic's employment duties, the 1999 merger of The Law Registry inot Kelly, the 2000 renegotiation of her compensation plan and Savic's refusal in 2000 to sign the "Agreement With Full-Time Employees of Kelly Corporations" and "Incentive Compensation Plan." That Kelly wanted the protections of a non-compete agreement is manifest from its actions in 2000 and in 2005, after Savic left their employ. Kelly, however, never obtained one. While Kelly was free to terminate Savic in 2000 for her refusal to sign the "Agreement With Full-Time Employees of Kelly Corporations," it chose instead to drop the subject, negotiate a new commission plan and hope for the best. It is clear from this record that a new employment relationship was negotiated in 2000 between Savic and Kelly, thereby voiding the 1990 Agreement if it survived the merger. Over time the parties to the 1990 Agreement changed, the name of the company changed several times, Savic's job responsibilities changed and her commission agreement changed. Indeed, Shelly Wallace, the only person empowered to amend the 1990 contract left the business in 1998. In 1999, Savic became a new employee of Kelly. When presented with a new employee agreement for Kelly employees in 2000, Savic refused to sign it. Savic's communication alerted Kelly that she had rejected their offer to enter into a new employment agreement and, at the same time, Savic rejected Kelly's Incentive Compensation Plan. In March 2000, the parties reached an agreement on a new compensation plan but never reached agreement on a Kelly employment agreement. On this record, the Court finds a new employment relationship was created, rendering the 1990 Employment Agreement unenforceable.
The Court notes that the 1990 Agreement only addresses commission for "permanent or temporary placement of paralegals" [Doc. #32, Ex. 2, ¶ 5]. Although the 1990 Agreement provides that it "may be amended at any time" it requires that "any such amendments must be in writing, signed by Shelly Wallace, on behalf of The Wallace Law Registry." Id. at ¶ 16. The Wallace Law Registry merged with Kelly in 1995. Shelly Wallace left Kelly in 1998. On February 16, 1999, The Wallace Law Registry filed a business name change to The Law Registry, Inc. [Doc. #32, Ex. D]. Savic became an employee, "new hire," of Kelly on January 1, 1999. [Pl. Ex. 20].
Accordingly, the Court denies plaintiff's motion for a preliminary injunction to enforce the 1990 Employment Agreement.
III. CONCLUSION
For the foregoing reasons, Kelly Services, Inc.'s Motion for Preliminary Injunction [Doc. #30] is DENIED.
Any objections to this recommended ruling must be filed with the Clerk of the Court within ten (10) days of the receipt of this order. Failure to object within ten (10) days may preclude appellate review. See 28 U.S.C. § 636(b)(1); Rules 72, 6(a) and 6(e) of the Federal Rules of Civil Procedure; Rule 72.2 of the Local Rules for United States Magistrates; Small v. Secretary of H.H.S., 892 F.2d 15 (2d Cir. 1989) (per curiam); F.D.I.C. v. Hillcrest Assoc., 66 F.3d 566, 569 (2d Cir. 1995).