On February 4, 2010, the United States District Court for the District of Maryland granted summary judgment to Plaintiff TEKsystems, Inc. (“TEK” or the “Company”), a leading technical staffing and services company, and enjoined its former Director of Strategic Accounts, Jonathan Bolton (“Bolton”), from violating certain restrictive covenants contained in his Employment Agreement.
Pursuant to the Employment Agreement, Bolton was prohibited from competing with the Company within a fifty (50) mile radius of the office in which he worked at the time his employment was terminated, for a period of eighteen (18) months following the termination of his employment. Although Bolton worked in New York City, the Employment Agreement at issue was executed in Maryland and the contract specifically provided that Maryland law would govern all disputes.
Less than two weeks after resigning from TEK, Bolton began working for another IT-staffing company as their Managing Director of New York City. Bolton worked out of his home in Wayne, New Jersey, which is located less than 50 miles from his prior office at TEK. Approximately one month later, TEK issued Bolton a cease and desist letter requesting that he provide written assurances that he would abide by the terms of his Employment Agreement. However, Bolton never provided any response to the Company. Consequently, TEK filed a lawsuit to enforce the restrictive covenant and sought an award of injunctive relief and damages.
In analyzing the restrictive covenant pursuant to Maryland law, the court concluded that it was reasonable in terms of both geographic scope and duration. The court noted that covenants imposing a far broader limitation than 50-miles had previously been upheld by courts in Maryland, especially where, as here, the Company operates on a nationwide and international level. Likewise, the 18-month duration of the restrictive covenant was clearly compliant with the norms governing the temporal scope of restrictive covenants.
The court also found that the covenant not to compete served to protect TEK’s legitimate business interest, as the Company’s success in the IT-staffing industry overwhelmingly depends upon the ability of its employees to make and maintain personal connections with clients, and Bolton was privy to TEK’s client contacts and confidential information. And, while the covenant could create some inconveniences for Bolton by prohibiting him from working in the New York City area for the next 18 months, the Court did not find that such inconveniences rose to the level of undue hardship. Finally, the court considered the public interest at stake and noted that “the public benefits from the enforcement of reasonable restrictive covenants” which serves to “facilitate and protect business growth, especially in technology-related and information based fields.”
Based on these conclusions, the court awarded a permanent injunction barring Bolton from operating in the New York City area for 18 months from the date of the court’s order. Because the court found that there was insufficient evidence showing that any of TEK’s customers had paid any fees to Bolton for his work with his new employer, the court declined to rule on damages, choosing instead to allow the parties to further brief that specific issue.
This case demonstrates that Maryland is a favorable forum for enforcing non-compete agreements, even where there is no proof that an employer has suffered a loss of profits. Thus, Maryland employers who wish to protect their legitimate business interests should not hesitate to utilize and maintain appropriate restrictive covenants, so long as such covenants are reasonable in terms of scope, geographic area and duration, do not unduly restrict an employee from earning a living, and do not limit fair competition.