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Ellis v. Lionikis

Decided: October 6, 1978.

ROBERT L. ELLIS, PLAINTIFF-RESPONDENT,
v.
GEORGE LIONIKIS, TRUSTEE; AND STATE INSULATION CORPORATION PROFIT SHARING TRUST, DEFENDANTS-APPELLANTS



On appeal from Superior Court, Chancery Division, Bergen County, whose opinion is reported at 152 N.J. Super. 321.

Fritz, Bischoff and Morgan. The opinion of the court was delivered by Bischoff, J.A.D.

Bischoff

Defendants George Lionikis, trustee, and State Insulation Corporation Profit Sharing Trust (trust), appeal from a judgment denying enforcement of a post-employment restrictive condition against competitive employment providing for a forfeiture of benefits in a profit-sharing trust for a violation thereof.

Plaintiff Robert Ellis was employed as a salesman by State Insulation Corporation (State) from September 9, 1966 until April 29, 1975, when he was discharged. He instituted this action to obtain (1) an accounting of his interest in a profit-sharing plan established by State in 1962 and (2) a judgment directing payment of that interest to him. The trust filed a counterclaim in which it sought a judgment declaring plaintiff's interest in the trust forfeited because of his violation of a condition against post-employment competition contained in the plan.

The condition provided for forfeiture of an employee's interest in the trust if he should, during the first two years

of separation from employment with State, engage directly or indirectly in competition with the business of State within a designated territory.

The trial judge, in an opinion reported at 152 N.J. Super. 321 (Ch. Div. 1977), held the forfeiture clause invalid as to plaintiff and determined that he had a vested interest in the trust in the amount of $17,755.74.

The facts are set forth in detail in the reported opinion (at 323-327) and need not be restated here. It is sufficient to observe that, after his discharge, plaintiff attempted to find work in noncompetitive types of employment. He was unable to do so and accepted employment in competition with State within the area proscribed by the condition in the plan.

No claim is made that either the time or space components of the condition against competition are unreasonable.

We consider, first, the impact of the Employee Retirement Income Security Act (ERISA), 29 U.S.C.A. ยง 1001 et seq. , upon the issues presented.

The trial judge found, and the parties concede, that nothing in ERISA deals expressly with forfeiture of vested interests in employee benefit plans occurring during the 1975 calendar year. However, he held that the portion of ERISA which became effective January 1, 1976 preempted the field and expressed a clear, unequivocal public policy against forfeiture of employee benefits because of post-employment competitive activity. For this public policy reason he ruled the forfeiture provisions in the plan invalid and not enforceable. This court has held such an approach to this issue is improper. In Knollmeyer v. Rudco Industries, Inc. , 154 N.J. Super. 309 (App. Div. 1977), where the issue was before us, we said:

Plaintiff suggests that the public policy implicit in the Pension Reform Act of 1974 (more properly the Employee Retirement Income Security Act of 1974), 29 ...


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