in the employer's "legitimate interest"
to prevent clients in the local area from
receiving treatment from the doctor.
In other cases, however, New York
courts have found a significant and
legitimate employer interest that warrants
upholding the non-compete clause.
According to the Restatement Third
of Employment Law § 8.07, restrictive
covenants may be valid in order to
protect employer's interests such as trade
secrets or the misappropriation of client
information.
Court of Appeals determined that a title
insurance salesman's job was considered
"unique" because he worked for the
company throughout most of his career,
was one of its highest paid employees,
and most importantly, the pool of potential
clients was very limited.
appreciated the importance of client and
employee relationships in this business
and considered this job as special
and extraordinary. As a result of the
uniqueness of the employee's services, the
restrictive covenant was enforceable.
Notably, however, in instances where
a personal client relationship is a result
of the employee's skill, reputation and
previous relationship, as opposed to
the direct performance of working for
the employer, a non-compete clause
is not likely to be broadly applied to
all of employee's client relationships.
Appeals in BDO Seidman v. Hirshberg,
only if a client relationship occurred as
a result of working for the employer can
the employer have a legitimate interest in
preventing the employee's "competitive
use of a client relationship." Therefore,
attempting to restrict a pre-existing
employee/client relationship is not likely
to be enforced by a restrictive covenant.
Non-compete agreements are more likely
considered reasonable and enforceable in
preventing employee solicitation where
the employee sold their customer accounts
or business to the employer.
grant a partial enforcement of a non-
non-compete clause and not another. This
can occur in cases where the employer
has a legitimate, protectable business
interest but the non-compete clause is
too broad. In these cases, the court looks
to details about the employer's conduct
to see if the employer acted in good faith
or if the employer tried to overreach or
manipulate the employee using unequal
bargaining power.
the non-compete clause is required to
protect the legitimate interest of the
employer, then the court proceeds to
the second factor to analyze whether
enforcing the non-compete clause is not
overly burdensome for the employee.
Although non-compete clauses must be
reasonable in time and geographic scope,
this does not require a specific, limited
duration. The First Department in Ashland
Management Inc. v. Altair Investments
NA, LLC, upheld a non-compete
agreement because it would not prevent
the employees from enjoying a successful
future business just because there was no
end time specified on their confidentiality
agreements. As long as the employee is
not caused undue hardship, as was the
case, the non-compete agreement still can
be enforceable.
Similarly, restricting a former
employee's competition inside the
geographic region that includes the
corporate business is likely to be found
reasonable and not overly burdensome for
the employee. For example, in Innovative
Networks, Inc. v. Satellite Airlines
Ticketing Centers, Inc., the Southern
District of New York determined that
limiting the employee from specifically
competing or misappropriating
information within the whole of the
continental United States, although
sizeable, was reasonable given that
Innovative Network Inc. monitored airline
business centers throughout the country
and the restriction was only to last for 12
months.
of New York held that the employer's
non-compete clause was unenforceable
because it was unreasonable in
geographic scope when the agreement
years from engaging in business anywhere
on earth where the employer did business,
marketed their products, or even planned
to market their products.
enforcing the non-compete clause will
cause injury to the public at large. Not
all restrictive covenants will be injurious
to the public. Corporate restrictive
covenants should not promote general
anti-competition, as this is considered
harmful for economic growth. For
example, a non-compete agreement that
is signed during the sale of a business
and containing a severely restrictive
burden placed on the seller, could result
in the seller withdrawing from this type of
business altogether. This withdrawal can
be damaging to the public if the result is
removing competitors, reducing a skill
set in the marketplace, and minimizing
competition.
worker mobility, it is crucial for counsel
to construct the non-compete agreement
in consideration of the three-part
reasonableness standard. At the very
least, the court will always look at the
specifics of the non-compete clause and
determine reasonableness and good
will on behalf of the employer, and the
resulting burden on the employee and
general public.
5 Restatement Third of Employment § 8.07 (2010):
also: Restatement Second of Contracts § 188, (1981):
Ancillary Restraints on Competition. See also Ashland
Management Inc. v. Altair Investments NA, LLC, 59
A.D.3d 97, 103 (1st Dep't 2008) where non-compete
agreements can strictly prohibit the use of any company
trade secrets that are explicitly or implicitly known.
8 Ecolab Inc. v. Paolo, 753 F.Supp. 1100 (E.D.N.Y. 1991).
9 BDO at 394-395.
10 Innovative Networks, Inc. v. Satellite Airlines Ticketing