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Evo v. Jomac Inc.

Decided: March 23, 1972.

JOHN EVO, PLAINTIFF,
v.
JOMAC, INC., A CORPORATION OF THE STATE OF PENNSYLVANIA AND THE FIRST PENNSYLVANIA BANKING AND TRUST COMPANY, ETC., DEFENDANTS



Larner, A.j.s.c.

Larner

Plaintiff was employed by Jomac, Inc., a national company based in Pennsylvania, in various capacities between November 1951 and November 1967. Initially he was hired as a salesman and in 1954 became district manager for sales of defendant's products in a territory including northern New Jersey, New York City and lower New York State. In 1959, he became sales manager for the roller division of the company, a division which manufactured and sold rollers for use in the process of printing on metal and other surfaces. Plaintiff continued in this capacity until February 1967 when he was designated accounts manager with a change in his mode of compensation. This position involved the servicing of several of the largest accounts of the roller division, including plants of American Can Co., Continental Can Co., National Can Co., and Crown Cork Co. in New Jersey and the New York metropolitan area.

In 1967 the executives of the company became dissatisfied with plaintiff's conduct, and after some discussion in November of that year he submitted his resignation at the request of the vice-president of the company. He was granted severance pay until the end of February 1968.

In June 1968 plaintiff went to work for William Recht Co. as a salesman in the northern New Jersey and New York metropolitan area, engaged in the sale of rubber printing blankets, inks and chemicals. However, in May 1969 a company known as Durex Industries was formed by Recht or its principals in a joint venture with Southern Rubber Co. This new company manufactured and sold rollers of the type handled by Jomac and sold by plaintiff while employed by Jomac. There is no question that Durex was and is in a line of business in direct competition with Jomac.

Although plaintiff has remained nominally as an employee of Recht, he has engaged in selling on a commission basis the competitive products of Durex. In fact he has acted as sales manager for both companies, and has even solicited and obtained business from some of the major customers of Jomac which were assigned to him in his capacity as Jomac's accounts manager.

The plaintiff seeks recovery from Jomac's Employees Profit Sharing Plan of such moneys and benefits accruing to him as a result of the termination of his employment with defendant in November 1967.

When plaintiff commenced his employment with Jomac in 1951 there was in existence a pension plan for which he was eligible which provided for certain retirement benefits and insurance coverage and which called for contributions by the employer and employee. He remained a member of this pension plan until 1960. As of June 30, 1960, the company unilaterally inaugurated a new retirement plan for the benefit of its employees, pegged to the profits of the company, which was designated as a "Profit-Sharing Plan."

Under this new plan, the vested accumulations in the old pension fund and the cash value of insurance policies were automatically credited to the account of the employee in the new profit sharing plan. The new plan did not require contributions by employees, except that voluntary contributions could be made by way of increase of the employee's interest in the ultimate available fund. In addition to payment from the plan upon retirement at age 65, there was also a provision for payment of benefits upon severance before the retirement age, based upon a schedule of the number of years of service. In any event, plaintiff's service in the company for 16 years made him eligible for full benefits which would become payable at age 65, with the discretionary power of the supervising committee to authorize payment before that time.

If the profit-sharing plan had remained in the same form as adopted in 1960, plaintiff admittedly would be entitled to the accumulations upon reaching age 65, as well as the benefits under the insurance policy which was maintained by the payment of premiums throughout the years of employment.

The controversy between the parties arises, however, because of an amendment to the profit-sharing plan adopted by the company in 1966. By this amendment the company provided that "notwithstanding any other provision of the plan, the amount payable to any former employee" whose employment has been severed prior to age 65 shall be terminated by the board of directors in the event that the employee shall at any time "engage in any activity which, in the judgment of the Board of Directors is in competition with the company's business, and in such event, such former employee shall have no further rights under the plan and shall forfeit all benefits theretofore vested in him."

Defendant concluded that plaintiff's employment with Recht and Durex was in competition with its business and that the aforesaid amendment justified its refusal to pay any benefits to plaintiff.

The court finds from the evidence that plaintiff has been engaged in business activity in direct competition with Jomac, and that the determination by the board of directors to that effect is fully supported by the facts. Thus, if the 1966 amendment to the plan is valid and enforceable, plaintiff would be barred from recovery.

Initially, plaintiff attacks the validity of the forfeiture clause on the basis that it constitutes a noncompetitive covenant which is unreasonable because it is limitless as to time and area. Hudson Foam Latex Products, Inc. v. Aiken , 82 N.J. Super. 508 (App. Div. 1964); Magic Fingers, Inc. v. Robins , 86 N.J. Super. 236 (Ch. Div. 1965). This contention is founded upon a misconception of the effect of the clause in the context of the profit-sharing plan. The inclusion of ...


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