The Court of Appeals of North Carolina overturned a trial court’s ruling that an assigned non-compete was unenforceable.
TSG is a company that specializes in “fabric finishing,” or the use of chemicals to effect the color and textures of various textiles. Former employee Bollinger had signed a non-compete agreement with TSG in 2007, and TSG subsequently filed for bankruptcy, and transferred its assets to a subsidiary corporation with a similar name. While Bollinger’s job remained the same, he technically now worked for a different company, who had been assigned his employment contract including the non-compete agreement. When Bollinger decided to go work for American Custom Finishing, a competitor located just 5 miles down the road, TSG sued to enjoin him from doing so based on the non-compete agreement. The trial court, however, decided that the agreement was unenforceable, primarily because there was no explicit assignability clause in the non-compete, and the trial court found that a balancing of the equities weighed against enforcement.
The Appellate Court disagreed with the trial court’s approach. The Court explained that the case relied on by the trial court, Hess v. Gebhard & Co., 808 A.2d 912 (PA 2002), was different from the present case in that the assignor and the assignee were basically strangers, while here the assignment was just part of a restructuring following a bankruptcy. Thus the non-compete is being enforced by TSG who is certainly not a “stranger to the original undertaking,” as was the case in Hess, and so the requirement that there be an assignability clause is substantially relaxed. Further, the fact that Bollinger was given an annual raise of $1,300 and a signing bonus of $3,500 for signing the non-compete, and that he left abruptly after 27 years of service at TSG to work at a competitor 5 miles down the road, both weigh strongly in favor of enforcing the non-compete. While the trial court was persuaded by Bollinger’s argument that he is unemployable outside the textile industry, and so enforcing the non-compete would be particularly burdensome on him, the Appellate Court was far less sympathetic.