New York Employment Lawyer Blog

On November 3, 2011, in Int'l Business Machines Corp. v. Visentin, the Second Circuit Court of Appeals affirmed a Southern District of New York decision denying IBM's application for a preliminary injunction to enforce a non-compete agreement and prevent a former employee from working for a competitor.

Visentin was employed by IBM in numerous roles over twenty-six (26) years. From 2007 through the end of his employment, he was General Manager of IBM's Integrated Technology Services ("ITS") business, where he was responsible for the development and sale of ITS products and services throughout North America.

On January 19, 2011, Visentin announced that he was leaving IBM to work for a competitor, Hewlett-Packard. However, Visentin had previously signed a non-compete agreement with IBM, which provided that he would not, during his employment and for a period of twelve (12) months following the termination of his employment, become employed by any competitor of IBM in any geographic area in the world for which Visentin had job responsibilities during his last twelve (12) months of employment with IBM.

Due to this agreement, Visentin even offered to remain at IBM for a reasonable transition period, but IBM declined that offer. Hewlett-Packard also took steps to avoid any overlap in responsibilities between Visentin's position at IBM and his new position, by insulating Visentin from former IBM customers, restricting his work to segments of its business for which he had not been responsible at IBM, and limiting him to working with established Hewlett-Packard clients.

As you might have guessed, IBM nonetheless instantly brought suit against Visentin alleging breach of the non-compete agreement and misappropriation of trade secrets, and moved for a preliminary injunction.

The Southern District of New York held that the non-competition agreement was overly broad and refused to grant IBM's request for a preliminary injunction. Reiterating the standard under New York law that "properly scoped non-competition agreements are enforceable to protect an employer's legitimate interests so long as they pose no undue hardship on the employee and do not militate against public policy," the Court recognized that while IBM's legitimate business interests were the protection of its confidential information and trade secrets, the agreement prohibited competition in areas where IBM had no legitimate business interests.

Thus, the Court held that IBM had not satisfied its burden of demonstrating that any of its confidential information or trade secrets would be disclosed or relied upon by Visentin as a result of his employment with Hewlett-Packard. According to the Court, Visentin was not a technological expert and was not on the front lines dealing with clients, and therefore had little knowledge of how deals were priced. The Court was also influenced by the fact that there was no evidence of prior wrongdoing or disclosure of confidential information by Visentin. As a result, the Court held that IBM was unable to establish that the non-competition agreement was enforceable under New York law.

Before signing a non-compete agreement, we always recommend that employees have a New York Non-Compete attorney review the agreement to ensure that the employee understands the terms of the agreement and the ramifications of signing it. Lastly, if you already signed a non-compete agreement and now have questions concerning the enforceability of your agreement, it's also smart to consult with a New York employment attorney.

In Eyes of the World, Inc. v. Boci, a New York court recently held that a former employee's restrictive covenant (non-compete agreement) prohibiting her from providing services to any client of her former employer was overly broad and, thus, unenforceable.

In this case, Defendant Boci worked for Plaintiff Eyes of the World, Inc., where she performed hair removal services. As an employee, Boci had signed a non-compete agreement which stated, "For a period of one (1) year following termination of your employment for any reason, you agree not to provide Salon Services in New York City to any client of Eyes of the World, Inc. for whom you provided services during the last twelve (12) months of your employment with Eyes of the World, Inc."

When Defendant Boci voluntarily resigned from her position, and began working for a competitor, Plaintiff sought to enforce the non-compete agreement, alleging that Boci performed services for eighty-six (86) former clients of Plaintiff at Boci's new place of employment within one (1) year of her termination.

The Court stated that, "In order to be enforceable, an anticompetitive covenant ancillary to an employment agreement must be reasonable in time and area, necessary to protect the employer's legitimate interests, not harmful to the public, and not unreasonably burdensome to the employee. ... Restrictive covenants are generally frowned upon by courts due to public policy considerations that seek to prevent restrictions on a person's livelihood. ... Consequently these covenants will be enforced only if reasonably limited temporally and geographically and then only to the extent necessary to protect the employer from unfair competition which stems from the employee's use or disclosure of trade secrets or confidential customer lists, or if the employee's services are unique or extraordinary."

Here, while Plaintiff attempted to establish that the services provided by Boci were unique and extraordinary, the Court rejected this argument, and found that Boci's skills were not unique or extraordinary, and furthermore, that it appeared clients "opted to follow Boci based on their needs and her ability." In addition, the Court found that there was no evidence that Boci had access to trade secrets, client lists, or proprietary information, ultimately holding that the non-compete clause was "unreasonable in its limitation, burdensome to the employee, and not necessary to protect the employer's legitimate interests."

The Court therefore struck down the restrictive covenant as overly broad and unreasonable, and dismissed Plaintiff's complaint.

Before signing a non-compete agreement, we always recommend that employees have a New York Non-Compete attorney review the agreement to ensure that the employee understands the terms of the agreement and the ramifications of signing it. Lastly, if you already signed a non-compete agreement and now have questions concerning the enforceability of your agreement, it's also smart to consult with a New York employment attorney.

In Kleinman v. Blue Ridge Foods, LLC (July 7, 2011), the Kings County Supreme Court granted an employee's motion for summary judgment on his breach of contract claims against his former employer.

In this case, pursuant to the terms of an employment agreement, Defendants hired Plaintiff as their Chief Executive Officer for a term of three (3) years. If Defendants wanted to discharge Plaintiff earlier, a prior written notice must be delivered to Plaintiff either personally or by mail. In addition, in the event Plaintiff's early discharge was without "cause," Plaintiff would be entitled to additional benefits, including a severance payment equal to twelve (12) months' salary.

After only four (4) months, with no prior written notice, Defendants abruptly discharged Plaintiff's employment. His discharge was communicated to him both verbally and in writing on that day.

Plaintiff then sued, asserting that, in accordance with his employment contract, since his discharge was without "cause," he was owed the severance and additional benefits.

While Defendants basically conceded that they failed to meet any of the "for cause" discharge provisions provided for in the agreement, they instead contended that Plaintiff could not recover the compensation he sought because the employment contract was unenforceable. Defendants claimed that Plaintiff defrauded them by misstating his work experience and "was in completely over his head and was at no time able to perform the job for which he was hired." They argued that the employment contract was thus void and unenforceable because they were induced to enter into it by Plaintiff's fraudulent misrepresentations as to his title and experience at his prior employment.

However, the court held that Defendants failed to establish a justifiable reliance on the purported misrepresentations, and noted a crucial factor was that Defendants failed to adequately verify Plaintiff's experience even though the means to do so were at their disposal.

The court thus ruled that Defendants terminated Plaintiff without "cause," as that term is defined in his employment contract. Further, the court found that Defendants breached the employment contract, as they failed to provide Plaintiff with the contractual notice and cure period. Therefore, the court held that Plaintiff was entitled to his actual damages, interest, attorney's fees, and costs under Section 198 and other provisions of Labor Law article 6, and the statutory liquidated damages under Labor Law § 198.

If you believe that your former employer has breached an employment agreement with you, it's always smart to immediately consult with a New York employment agreement attorney to preserve your legal rights.

On July 11, 2011, in Ridinger v. Dow Jones & Co Inc., the Second Circuit ruled that a 62-year-old employee's age discrimination claim brought under the Age Discrimination in Employment Act ("ADEA") was barred due to a valid separation agreement that the employee had signed.

In his separation agreement, the employee agreed to waive and release all claims up to the point of his termination, explicitly including those claims for discrimination under the ADEA. Despite signing it and accepting all the benefits of the severance package, the employee nonetheless sued for discrimination, arguing that the release was invalid because it violated the Older Workers Benefit Protection Act ("OWBPA"), which requires that an employee waive his or her ADEA claim in a "knowing and voluntary" way and that a separation agreement be "written in a manner calculated to be understood."

The employee also argued that the waiver provision violated Equal Employment Opportunity Commission ("EEOC") regulations, which require a waiver to be drafted in plain language, not using "technical jargon" or "long, complex sentences," and "geared to the level of understanding" of the employee, taking into consideration the typical employee's education level.

The Second Circuit rejected the employee's arguments and held that the separation agreement was in fact enforceable, as it was written by the employer in a "manner calculated to be understood" by the relevant employees. Comparing the language in this agreement to those found in cases in which the court invalidated a company's separation agreement, the Court found that the terms in this separation agreement were sufficiently clear and complied with the OWBPA.

This decision should serve as a reminder to all employers of the importance of drafting separation agreements in a clear manner using plain language. In addition, if you signed a severance or separation agreement as an employee, it's always smart to have a New York Severance Agreement attorney review the agreement, especially if it includes provisions related to age discrimination.

On June 1, 2011, in Peconic Surgical Group, P.C. v. Cervone, the New York State Supreme Court, Suffolk County, granted a medical group's motion for a preliminary injunction and temporary restraining order enforcing a restrictive covenant (non-compete clause) contained in two (2) physicians' employment agreements.

The plaintiff, Peconic Surgical Group, P.C. ("PSG"), is a medical group consisting of surgeons. Before joining PSG, the defendant surgeons signed employment agreements with PSG, in which they agreed that, for a period of three (3) years after leaving PSG, they would not engage in the practice of surgery within fifteen (15) miles of PSG's office.

After both defendant surgeons resigned from their positions, PSG brought suit alleging that the surgeons violated the restrictive covenant by opening an office approximately three (3) miles from PSG's office.

As the court noted, when enforcing "restrictive covenants among professionals, great weight is given to the interests of the employer in restricting competition within a confined geographic area. The rationale therefor is that professionals are deemed to provide unique or extraordinary services. In fact, the interests of the employer have enjoyed solicitous consideration by the courts when the restrictive covenant is in an employment agreement between doctors."

Using this rationale, the court held that the three-year, fifteen-mile restriction on the surgeons' practice was reasonable in time, geographic area, and scope. Also, because the geographic area in question was served by several hospitals, the court found that that enforcement of the restrictive covenant was not harmful to the public.

The court then stated that PSG "has demonstrated a strong probability of irreparable harm if the preliminary injunction were denied. Not only would PSG lose the investment it made in hiring the defendants and establishing the practice for which they were hired, a loss that is not readily compensated by money damages, it would also lose patients and revenues to [defendants'] new practice, as well as the goodwill associated with the practice, which is difficult to quantify."

This decision reinforces the need to weigh the availability of professional services in a given area when determining the enforceability of a non-compete agreement.

Before signing a non-compete agreement, we always recommend that employees have a New York non-compete attorney review the agreement to ensure that the employee understands the terms of the agreement and the ramifications of signing it.

Many people wonder why severance agreements often advise the employee "to consult with an attorney before signing this agreement." Employers don't include this language out of the kindness of their heart or out of concern for the employee, but rather because it's mandated by the Age Discrimination in Employment Act ("ADEA") - meaning that this language is only required in agreements where the employee is waiving any rights she or he might have relating to discrimination on the basis of age. In fact, this is not the only requirement for an age discrimination waiver to be valid and enforceable.

In order for employees to waive their rights under the ADEA, a written waiver must meet special requirements that do not apply to other employment discrimination statutes. Embodied in the Older Workers Benefit Protection Act ("OWBPA"), the requirements are designed to give employees the information and time they need to evaluate whether they have a valid ADEA claim before waiving their rights.

To be valid and enforceable, the waiver must:

1. Be written in "a manner calculated to be understood" by the employee or "the average individual eligible to participate;"
2. Specifically refer to rights or claims arising under the ADEA;
3. Not call for the waiver of rights or claims that arise after the date the waiver is signed;
4. Provide the employee with "consideration in addition to anything of value to which the individual is already entitled;"
5. Advise the employee "in writing to consult with an attorney" prior to signing the waiver;
6. Give the employee twenty-one (21) days to consider the agreement or, in the event of a group termination or exit incentive program, forty-five (45) days; and
7. Give the employee seven (7) days after signing the agreement to revoke the agreement.

Before signing a severance or separation agreement, we always recommend that employees have a New York severance agreement attorney review the agreement to ensure that the employee understands the terms of the agreement and the ramifications of signing it.