Commercial Division Blog
Fourth Department Declares Florida Law Regarding the Enforcement of Non-Compete Agreements Unenforceable on Public Policy Grounds
On February 7, 2014, the Fourth Department issued a decision in Brown & Brown, Inc. v. Johnson, 2014 NY Slip Op. 00822, declaring unenforceable on public policy grounds a Florida statute providing that in determining the enforceability of a non-compete agreement, a court "shall not consider any individualized economic or other hardship that might be caused to the person against whom enforcement is sought."
In Brown & Brown, the plaintiff sued a former employee for breach of restrictive covenants in an employment agreement that prohibited her from soliciting customers or employees for a two-year period following the termination of her employment. As the Fourth Department noted, under New York law, non-compete agreements are "almost uniformly disfavored and are sustained only to the extent that they are reasonably necessary to protect the legitimate interests of the employer and not unduly harsh or burdensome to the one restrained." The courts apply a three-part test to assess the reasonableness of a restrictive covenant under which the party moving to enforce the agreement must show that the restraint "(1) 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." The employment agreement at issue, however, was governed by Florida law, which "expressly forbids courts from considering the hardship imposed upon an employee in evaluating the reasonableness of a restrictive covenant." The Fourth Department found that Florida law conflicts with New York public policy and is therefore unenforceable:
[W]e conclude that Florida law prohibiting courts from considering the hardship imposed on the person against whom enforcement is sought is "truly obnoxious" to New York Public Policy, inasmuch as under New York law, a restrictive covenant that imposes an undue hardship on the employee is invalid and unenforceable for that reason. Furthermore, while New York judicially disfavors such restrictive covenants, and New York courts will carefully scrutinize such agreements and enforce them only to the extent that they are reasonably necessary to protect the legitimate interest of the employer and not unduly harsh or burdensome to the one restrained, Florida law requires courts to construe such restrictive covenants in favor of the party seeking to protect its legitimate business interests.
This decision demonstrates the strong New York public policy disfavoring non-compete agreements and the unwillingness of the New York courts to enforce foreign laws that contravene that policy.