When NY Employers Condition Receipt of Post-Employment Benefits on a Non-Compete
As you may be aware, it has become increasingly common for employers to condition their employees' receipt of post-employment benefits upon the employees' agreement to abide by a strict non-compete clause. So here's the question (which, unfortunately, occurs altogether too frequently): what if the non-compete is unreasonably and unduly restrictive (i.e., prevents you from using your acquired knowledge and expertise to earn a living), and your job has become intolerable to the point you want to quit? Unfortunately, for purposes of evaluating the enforceability of a non-compete, or non-competition agreement, the difference between voluntarily resigning and being fired is quite important under New York law. This is known in legalese as the "employee choice doctrine." (For additional information on this topic, please see "When NY Courts Will Uphold Non-Compete Clauses - No Matter How Unreasonable"). As a tacit exception to New York's rule that disfavors non-compete agreements, the employee choice doctrine is based on the notion that "if the employee is given the choice of preserving contract rights by refraining from competition or risking forfeiture of such rights by exercising a right to compete, there is no unreasonable restraint upon an employee's right to earn a living." Post v Merrill Lynch, Pierce, Fenner & Smith, Inc., 48 NY2d 84, 421 NYS2d 847, 397 NE2d 358. But there is a way to defeat this exception. In case you didn't already know it (and I suspect that's most people), you don't have to actually be fired in order to be considered fired from a job under New York law, and thereby effectively invalidate the non-compete agreement. But as you might suspect, the test to satisfy this doctrine, which in legalese is called "constructive termination" or "constructive discharge," is difficult to prove. The test for constructive discharge was established by the Federal courts, and occurs âwhen the employer, rather than acting directly, deliberately makes an employee's working conditions so intolerable that the employee is forced into an involuntary resignationâ ( Pena v. Brattleboro Retreat, 702 F.2d 322, 325 [2d Cir.1983]. A claimant can prove that she was constructively discharged by establishing that the working conditions "[were] so difficult or unpleasant that a reasonable person in the employee's shoes would have felt compelled to resign ( Pena, 702 F.2d at 325 ).
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