Caputo nor other Gagliardi employees had any right to advance notice of termination or severance pay, but it was Gagliardi's policy to treat terminated employees fairly and pay two or more weeks severance pay, depending on the circumstances.
Caputo was informed on July 7, 1981, by Blott, the Gagliardi President, that his employment would be terminated. Prior approval of the Board of Directors was not obtained. Caputo was fired because of Gagliardi's determination that he was unable to keep up with their new organization and because he was not that important in that new structure. At the July 7, 1981 meeting with Blott, Caputo signed a letter, dated June 29, 1981, which provided, in pertinent part, that he would continue to be employed by Gagliardi on a full-time basis until September 25, 1981, at full salary and benefits, and would be assigned to participate on a full-time basis to assist his personal career continuation through the services of Hay Career Consultants; that the employment contract would be strictly adhered to; and that the four weeks severance pay would not be paid because of the compensation to be provided as outlined in the letter. Accordingly, Caputo was paid his full salary and benefits through September 25, 1981. In addition, he received lump sum payments representing his previously awarded Merit Incentive bonus entitlement, and his Profit Sharing Plan interest. Caputo also received at Gagliardi's expense, the services of Hay Career Consultants.
From July through September, 1981 Caputo sent approximately 150 resumes to prospective employers, answered several advertisements and contacted several placement services. He received no offers of employment. In the year prior to his termination, Caputo received three unsolicited offers of employment, each of which would have required relocation to other areas of the country. Neither Caputo nor his family want to move out of the area. Together with his wife, Caputo runs an independent accounting business in Wilmington, Delaware, incorporated as "Pat and Dan's Accounting Service."
On October 6, 1981, Caputo began work with Devault Packing Company, Inc., (Devault), in Devault, Pennsylvania, within 25 miles of West Chester, Pennsylvania, for a salary of $28,500. per year. Devault is in the business of processing and marketing portion controlled meats, and produces a sliced sandwich steak product similar to Steak-umm. Devault's 1980 revenue from the sale of sandwich steak was approximately $5,000,000.00, which represents about 10% of its revenue. Thus, it is a competitor of Gagliardi. At least one dozen other companies produce and market a similar steak product.
Gagliardi's sale of Steak-umm in 1980 was approximately $80 million, and its marketing area is not restricted to a 100 mile radius surrounding West Chester, Pennsylvania.
Since approximately 1977, no Gagliardi employees have been required to sign employment contracts such as that signed by Caputo. Gagliardi President, Mr. Blott, Caputo's successor at Gagliardi, Richard Durham, and other management employees hired since the acquisition by Heinz, have not entered into contracts with convenants not to compete.
In the recent case of Minnesota Mining and Manufacturing v. Prosceno, slip op. at 6, C.A. No. 81-3550 (E.D.Pa., January 14, 1982), Judge McGlynn succinctly summarized the requirements, in Pennsylvania, for a valid restrictive covenant:
(1) the covenant must relate to either a contract for sale of goodwill or other subject property or to a contract of employment (ancillary to an employment contract); (2) the covenant must be supported by adequate consideration; (3) the covenant must be reasonably limited in time and geographic territory and (4) the covenant must be necessary to protect the employer. George W. Kistler, Inc. v. O'Brien, 464 Pa. 475, 347 A.2d 311 (1975); Maintenance Specialties, Inc. v. Gottus, 455 Pa. 327, 314 A.2d 279 (1974); Jacobson & Co. v. International Environment Corp., 427 Pa. 439, 235 A.2d 612 (1967); Morgan's Home Equipment Corp. v. Martucci, 390 Pa. 618, 136 A.2d 838 (1957).