non-compete cartoon

It’s kind of ironic that a news agency–which depends on the freedoms granted in the Constitution–would restrict a former employee’s ability to make a living on the pretense of “protecting trade secrets” and other kinds of confidential information that the rank-and-file employee probably doesn’t have access to anyway. It makes one suspect ulterior motives on the part of the employer.

And yet this kind of thing happens all the time in New York.

After rounds of interviewing for you dream job, your old boss slaps you with a non-compete agreement you signed ages ago. He threatens to tell your new employer, dashing your dreams of working for the new employer and harming your ability to earn money because no one wants to hire you if they’ll get sued by hiring you. So what do you do?

Non-Competes in New York: A Major Boon for Employee Mobility

According to the Wall Street Journal, something similar recently happened to former Law360 reporter, Stephanie Russel-Kraft. She left her job at Law360 for a position at Reuters. She failed to mention she had a non-compete agreement (because she claims she forgot she signed it years ago) to Reuters. When Law360 informed Reuters of the non-compete agreement, they fired her. Now other employers are weary of hiring her, as a result. Law360 claims that “their former reporters had access to ‘critical and sensitive’ business information”, which trigger the non-compete agreement and bars Russel-Kraft from working at the ostensible competitor, Reuters.

Fortunately, New York Attorney General Eric Schneiderman has reportedly taken an interest in her case. But, it’s very rare that the state intercedes in such matters. More likely, a private attorney must be retained to challenge the non-compete in court or try to smooth things out between the old firm and the departing employee. One thing is for certain, not telling your new firm of the non-compete agreement is a terrible idea. It will get you fired from the new firm and the old firm may sue you for breach of the agreement.

New York Non-Competes: The Basics of the Law

What is paramount at the outset of any dispute about a non-compete is whether it is enforceable. Below are the factors courts in New York use to decide that question. In general, courts in New York tend not to favor restricting an employee’s right to move from company to company. But, many of the factors involved aren’t obvious, and any employee facing a non-compete should seek advice from an employment lawyer.

To find a non-compete clause valid and therefore enforceable, New York courts apply a three-part reasonableness test. The general rule to determine if an employee’s non-competition clause is enforceable is if,

  • (1) it is no greater than is required for the protection of the legitimate interest of the employer,
  • (2) does not impose undue hardship on the employee, and
  • (3) is not injurious to
    the public.”

Therefore, reasonableness varies and the court will look at all the case specifics before making a determination of law. To be effective, the non-compete agreement should mirror this reasonableness standard.

First, the non-compete agreement should outline the firm’s legitimate business interest. In the Southern District Court of New York, the firm’s legitimate interest is

  • 1) to prevent disclosure of trade secrets or employee/client solicitation,
  • 2) to prevent disclosure of private client information, or
  • 3) where employee’s skill and service is considered “special
    or unique.”

Sometimes, New York courts determine that the non-compete is unnecessary and therefore the non-compete clause is ineffective. For example, in Last v. New York Institute of Technology, a doctor signed an non-compete stating he would not work within 10 miles of the clinic where he was assigned to work.The doctor was fired after refusing to relocate elsewhere with the clinic, and he remained in the area seeing patients. Despite signing a non-compete and still practicing in the same area, the court determined that since that employer relocated it was not in the employer’s “legitimate interest” to prevent clients in the local area from receiving treatment from the doctor.

In the case of the Law360 reporter, she may well be off the hook if she can show that she didn’t have access to any trade secrets, client information or other kinds of confidential information. Considering she was a rank-and-file employee, it’s likely she would not. But, that needs to be determined ultimately by a fact-finder, and other factors may come into play.

 

More from our blog

No Comments
     

    Leave a Comment