If you are an employer with employees in New York (or elsewhere) who have signed an agreement containing a Florida choice of law clause and non-compete and/or non-solicit restrictive covenants, it may be time to revise your agreement.
We blogged last year regarding a decision of the New York Appellate Division, Fourth Department in Brown & Brown, Inc. v. Johnson, holding that a Florida choice of law provision in an employment agreement among a Florida corporation, its New York subsidiary, and a New York based and resident employee containing restrictive covenants is unenforceable because certain elements of the Florida restrictive covenant statute are contrary to New York public policy.
Last month, upon the appeal of that decision, the New York Court of Appeals agreed and held that “applying Florida law on restrictive covenants related to the non-solicitation of customers by a former employee would violate the public policy of [New York].” New York courts are generally favorable to enforcing choice of law clauses, unless the chosen law violates a fundamental public policy of the state. Here, the relevant public policy of New York is that restrictive covenants will only be enforced if they are (1) no greater than required for the protection of the legitimate interest of the employer, (2) not unduly hard on the employee, and (3) not injurious to the public. In contrast, the Florida restrictive covenant statute explicitly prohibits courts from considering the harm or hardship to the former employee, after the employer has demonstrated the covenant protects its business interests. The Florida statute also — unlike New York — requires courts to construe restrictive covenants in favor of protecting the employer’s interests and bars narrow interpretations of such covenants.
The Court of Appeals thus held that the employment agreement’s choice of law provision was unenforceable in relation to the non-solicit provision, and proceeded to apply New York law in its examination of that provision and the relevant facts.
With New York’s highest court having now spoken, New York employers with employees who have Florida choice of law provisions in their employment agreements should undertake a review of such agreements to confirm that any restrictive covenants comply with New York law. Employers in other states which like New York disfavor restrictive covenants and look to protect or at least balance the interests of the employee should also re-examine their covenants if they have chosen Florida law to govern. Revisions may be necessary to improve the chances of enforcing the restrictive covenants going forward.