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Restrictive covenants in employment—also referred to as non-compete clauses—are generally not favored.  However, they will be enforced by the courts to the extent they are reasonable and necessary to protect legitimate business interests, such as the protection of an employer’s trade secrets or confidential customer lists, or protection from an employee whose services are unique or extraordinary.  Courts have also held that employers have a legitimate interest in preventing former employees from exploiting the goodwill of a client or customer, which had been created and maintained at the employer’s expense, to the employer’s competitive detriment.

Sometimes courts will sever and grant partial enforcement for an overbroad employee restrictive covenant.  But, partial enforcement of an otherwise overbroad restrictive covenant is justified only if the employer demonstrates an absence of overreaching, coercive use of dominant bargaining power, or other anti-competitive misconduct, and that it has in good faith sought to protect a legitimate business interest, consistent with reasonable standards of fair dealing.  This is typically a case specific analysis. 

Although partial enforcement is permissible, the Court of Appeals cautioned that “[a] legitimate consideration against [partial enforcement of an otherwise overbroad restrictive covenant] is the fear that employers will use their superior bargaining position to impose unreasonable anti-competitive restrictions, uninhibited by the risk that a court will void the entire agreement, leaving the employee free of restraint.”  BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 394 (1999). 

In 2015, we wrote about the case of Brown & Brown, Inc. v. Johnson, where the Appellate Division refused to partially enforce an overly broad restrictive covenant even though the agreement itself expressly authorized severance and partial enforcement.  The court concluded that doing so would enhance the risk that “employers will use their superior bargaining position to impose unreasonable anti-competitive restrictions, uninhibited by the risk that a court will void the entire agreement, leaving the employee free of any restraint.” 

As we noted at the time, the Court of Appeals later reversed that decision because, among other things, it believed there were issues of fact, that raised questions about whether the employer engaged in overreaching or used coercive dominant bargaining power to obtain the restrictive covenant at issue. 

The case was remanded back to the lower courts for further proceedings, and we wanted to write a follow-up post now that the Appellate Division upheld the trial court’s determination following a bench trial.  The Appellate Division held that partial enforcement of the non-solicitation covenant was not warranted.  [Brown & Brown, Inc. v. Johnson, 158 A.D.3d 1148 (4th Dep’t 2018)].  The evidence established that:

• Contrary to employer’s contention, the defendant-former employee did not have equal or superior bargaining power. The non-solicitation covenant was imposed as a condition of defendant’s employment, after she had already left her former employer and her position there had been filled. 
• The employer required all employees—regardless of position—to sign an agreement containing a non-solicitation covenant as a condition of employment. According to the court, this undercut the employer’s contention that the covenant was necessary to protect its legitimate interests.
• Finally, the fact that the agreement provided for partial enforcement of the non-solicitation covenant—which was clearly over-broad under New York law—was found by the court to cast doubt on employer’s good faith in imposing the covenant on its employee.

Employers with legitimate interests to protect, must carefully and narrowly tailor their restrictive covenants to avoid the risk that a court will void the entire agreement, leaving employees free of any contractual restraint. 

If you would like to schedule a consultation to talk about restrictive covenants in employment,  please feel free to contact Peter Weishaar at pweishaar@mccmlaw.com or (585) 512-3542.  Peter also writes a law blog, the Rochester Law Review, covering legal developments, cases of interest, and events happening in all of the key areas of his practice.  Peter's employment practice includes the representation of businesses and individuals in matters involving restrictive covenants, non-compete agreements, discrimination and failure to pay wages in State and Federal Courts, and before administrative agencies, including the New York State Division of Human Rights and the United States Equal Employment Opportunity Commission.

This publication is intended as an information source for clients, prospective clients, and colleagues and constitutes attorney advertising. The content should not be considered legal advice and readers should not act upon information in this publication without individualized professional counsel.

About MCCM

McConville Considine Cooman & Morin, P.C. is a full-service law firm based in Rochester, New York, providing high-quality legal services to businesses and individuals since 1979.  With over a dozen attorneys and a full paralegal support staff, the firm is well-positioned to right-size services tailored to each client. We are large enough to provide expertise in a broad range of practice areas, yet small enough to devote prompt, personal attention to our clients.

We represent a diverse range of clients located throughout New York State and New England.  They include individuals, numerous manufacturing and service industry businesses, local governments, and health care professionals, provider groups, facilities and associations. We also serve as local counsel to out-of-state clients and their attorneys who have litigation pending in Western New York courts.  For more information, please contact us at 585.546.2500.

This publication is intended as an information source for clients, prospective clients, and colleagues and constitutes attorney advertising. The content should not be considered legal advice and readers should not act upon information in this publication without individualized professional counsel.

About MCCM

McConville Considine Cooman & Morin, P.C. is a full-service law firm based in Rochester, New York, providing high-quality legal services to businesses and individuals since 1979.  With over a dozen attorneys and a full paralegal support staff, the firm is well-positioned to right-size services tailored to each client. We are large enough to provide expertise in a broad range of practice areas, yet small enough to devote prompt, personal attention to our clients.

We represent a diverse range of clients located throughout New York State and New England.  They include individuals, numerous manufacturing and service industry businesses, local governments, and health care professionals, provider groups, facilities and associations. We also serve as local counsel to out-of-state clients and their attorneys who have litigation pending in Western New York courts.  For more information, please contact us at 585.546.2500.