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Why a NY Unemployment Board Finding Has No Bearing on a Lawsuit

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Jonathan Cooper
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As suggested by the title in "How a Non-Compete Can Remain Enforceable in New York - Even if You're Fired," the general rule in New York is that if an employee is fired - as opposed to where the employee resigns - the non-compete clause contained in his or her employment agreement will no longer be enforceable.

Suppose, however, that the employee and employer disagree as to whether the employee was fired or simply quit, and this becomes the central issue in their lawsuit over the enforceability of the employee's non-compete clause. And assume further that the employer challenges the former employee's application for unemployment benefits on the grounds that the employee resigned, and wasn't terminated.

Would the unemployment board's finding on the issue be binding for purposes of the litigation?

Interestingly, although there is a well-established concept under New York law that bars a party from re-litigating an issue that has already been decided (in legalese, its part of the twin doctrines of "collateral estoppel" and "res judicata"), the unemployment board's findings would have no preclusive effect on the litigation.

And here's why:

New York Labor Law §623 provides that, other than in some very limited circumstances, "[N]o finding of fact or law contained in a decision rendered pursuant to this article by a referee, the appeal board or a court shall preclude the litigation of any issue of fact or law in any subsequent action or proceeding."

Category: General