Non-Solicitation Agreements in New York: The Ultimate Guide for Executives
In New York, a non-solicitation agreement is a standard clause often included in employment contracts. It restricts employees from actively seeking out clients or employees from their current employer for a specified period after their employment ends. These agreements aim to protect a company’s intellectual property, trade secrets, and client base. They are commonly used by private employers across various industries in New York to safeguard their business interests.
Many companies, especially those involved in service or sales industries, see these agreements as a way to safeguard their client bases.
For other companies, they’re a way to protect their investments in hiring and training employees in specialized skills.
Many New York employees may not realize they’ve signed a non-solicitation agreement until a dispute arises. Then, they’re faced with the threat of a lawsuit.
Fortunately, even if you’ve signed one of these contracts, with the help of an employment attorney, you may still be able to get out from under its restrictions and avoid an employer’s potential legal action.
In this guide, we’ll explain how non-solicitation agreements work and describe how they’re enforced in New York. We’ll also walk through the ways an employment lawyer can help you handle a non-solicitation agreement dispute.
If you still have questions or would like to speak with a New York employment lawyer, please contact us online today or call 213-204-8002.
How Do Non-Solicitation Agreements Work in New York?
Non-solicitation agreements are a type of “restrictive covenant.” Like non-compete and non-disclosure agreements, they limit what employees can do after leaving their jobs. These agreements prohibit individuals from “soliciting” their former employer’s customers, clients, or other employees.
Since there’s no universal legal definition of “solicitation,” the specific behaviors prohibited by a non-solicitation agreement vary from contract to contract. For instance:
- A pharmaceutical company might prevent former employees from poaching colleagues for rival firms.
- A project management software business might restrict departing employees from contacting clients they previously worked with.
Non-solicitation agreements include specific geographic and temporal limits. For example, a Manhattan chiropractor starting an independent practice might be barred from contacting previous clients within New York City for 12 months.
Employers often include these agreements in employment contracts or severance packages, but they can also present them as separate documents during employment. While they can limit commercial growth and employees’ professional pursuits, New York courts often disfavor them unless they meet specific criteria.
What Makes a Non-Solicitation Agreement Enforceable in New York?
In New York, non-solicitation agreements must meet three criteria to be enforceable (BDO Seidman v. Hirshberg, 1999):
- Protect Legitimate Business Interests: The restrictions must be necessary to protect the employer’s legitimate business interests.
- No Undue Hardship: They should not impose an undue hardship on the employee.
- Not Harm the Public: The agreement must not harm the public.
Courts balance employers’ business interests with employees’ freedom to pursue their professional goals. Restrictions should not be overly long, broad, or unlimited. For example, a non-solicitation agreement preventing a doctor from soliciting former clients anywhere in New York state for five years could be burdensome.
Limitations that negatively impact public health or safety are also off-limits. This includes situations where a non-solicit prevents medical personnel from working in underserved areas.
Who Is Off-Limits in Non-Solicitation of Customers?
Determining the scope of a non-solicit of former clients or customers can be challenging. For instance, if an executive at a wealth management firm leaves, does she have to avoid all customers of her former employer or just those she serviced?
New York courts generally enforce non-solicitation agreements that prevent the competitive use of relationships acquired during employment. Thus, most cases focus on customer relationships created during the employee’s term. These agreements typically do not cover relationships developed outside of employment, allowing you to contact customers met before or after leaving the company.
Do Non-Solicitation Agreements Apply to All Former Employees?
Most New York non-solicitation agreements include clauses prohibiting the recruitment of former coworkers for a period. Courts tend to enforce agreements targeting employee non-solicitation, as they view these as less burdensome than customer restrictions.
However, restrictions must still meet New York’s enforceability criteria. Employers’ legitimate interests in retaining human resources should not unduly restrict worker mobility or trade. Generally, courts enforce non-solicitation agreements when they protect legitimate trade secrets or uniquely specialized skills developed during employment.
For example, an executive editor leaving the New York Times might be barred from contacting employees involved in compiling the Times’ bestseller list, a trade-secret process. Agreements preventing solicitation of employees with rare, highly specialized skills may also be enforced.
New York courts often reject claims that solicitation will destabilize the workforce. They also dismiss claims that it will cause significant financial losses or lead to mass resignations.
New NY Legal Precedents
Enforcement of employee non-solicit provisions, or “non-recruitment” provisions, in New York is complex and inconsistent. This area of law needs a clear appellate court decision to provide guidance and consistency.
Frequent Disputes
- Disputes often arise when one company hires a group of employees from another, leading to claims of violating non-recruitment clauses.
- New York law is unclear about whether these restrictions are enforceable.
Lack of Controlling Law
- Many trial courts note the lack of definitive appellate law on this issue:
- Parella Weinberg v. Kramer (2023): Limited case law on employee solicitation provisions.
- Admarketplace Inc. v. Salzman (2014): Minimal case law on non-recruitment clauses’ enforceability.
- OTG Management, LLC v. Konstantinidis (2013): Only one state court has discussed the applicable standard.
- Due to the absence of controlling authority, trial courts differ significantly in their enforcement of non-recruitment provisions.
Non-Recruitment Provisions Held Unenforceable
- Lazer Inc. v. Kesselring (2005): Non-recruitment provisions are enforceable only if they protect confidential information, trade secrets, or uniquely valuable employees.
- Recent Federal Cases:
- In re Document Technologies Litigation (2017): Preventing coordinated “en masse” resignations is not a legitimate interest. Non-recruitment provisions should not keep employees uninformed about job opportunities.
- QBE America, Inc. v. Allen (2022): Coordinated departures of workers marketing themselves as a package deal are not unfair.
- Other Cases:
- National Tax and Financial Services, Inc. v. Ciocia (2022): Followed the reasoning in Document Technologies.
- Parmanens Capital, L.P. v. Bruce (2022): Struck down a non-recruitment provision.
- Reed Elsevier Inc. v. Transunion Holding Co., Inc. (2014): Invalidated a non-recruit provision.
Non-Recruitment Provisions Held Enforceable
- Some cases argue that non-recruitment provisions are less anti-competitive than non-compete clauses since employees can still pursue their careers.
- OTG Management (2013): Non-recruitment clauses are more reasonable and less restrictive than non-compete clauses.
- Renaissance Nutrition, Inc. v. Jarrett (2012): Non-recruitment clauses do not prevent employees from engaging in their occupation but only from recruiting former co-workers.
- Supporting Cases:
- Parella Weinberg (2023): Enforced a non-recruitment provision.
- Admarketplace (2014): Enforced a non-recruitment provision.
- Oliver Wyman, Inc. v. Eielson (2017): Enforced a non-recruitment provision.
Conclusion
There is a lack of uniformity in enforcing non-recruitment provisions under New York law. Cases show inconsistent results and lack compelling rationales. No appellate court has provided an authoritative decision, leaving state and federal trial courts to make inconsistent rulings. Both employers and employees need better guidance on this issue, and an appellate court decision is needed to define the rules regarding employee non-recruitment provisions.
How Can I Get Help with My Non-Solicitation Agreement?
If you’re concerned about a non-solicitation agreement, consulting with an employment lawyer is advisable. An attorney can review the document, explain its terms, and help you understand its potential impact. Whether you are presented with a new agreement or preparing to leave your job, seek legal advice to clarify your options and avoid disputes.
Get in Contact with a New York Employment Lawyer Today
Ottinger Employment Lawyers has been helping workers escape from unfair and unenforceable employment contracts for over two decades.
If you work in New York and are concerned about a dispute in the workplace — whether it’s a non-solicitation agreement, non-compete agreement, harassment, or illegal retaliation — our team of experienced attorneys can help you navigate the legal system and get the restitution you deserve.
Contact our office today to speak to one of our advocates about your case.