The Critical Difference Between a Non-Solicit & a Non-Compete in New York
In case you thought that a non-compete provision and a non-solicit provision in the context of an employment agreement were really one and the same, a NY Federal judge's clear opinion to the contrary should disabuse you of that notion.
Here's the Difference Between Non-Compete Clause & Non-Solicit Provision:
- A non-compete clause bars the employee, who is looking to change jobs, from working for a direct competitor, or engaging in a business that competes with the former employer
- A non-solicit provision, on the other hand, seeks to prevent the employee from poaching the employer's clients, prospective clients or employees
And here's why the distinction matters:
An employer will have a much harder time demonstrating that the employee should be barred from finding a better job elsewhere than it will in showing that the employee should be prohibited from raiding, or enticing to leave, its clients, prospective clients or other employees.
To that end, the Court summarized this the difference between non-compete clause and non-solicit provision as follows:
"[W]here an employer proffers protecting customer goodwill as the legitimate interest it seeks to protect with a restrictive covenant, the covenant must actually protect that interest. A broad non-compete that baldly prevents competition will not be enforced, particularly where the employer is already protected by a non-solicitation agreement. This is the standard set forth by the New York Court of Appeals in BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999). There, the court explained that a restraint will only be considered reasonable if it is "no greater than is required for the protection of the legitimate interest of the employer…." Id. at 388-89 (emphasis in original)."
Like the courts in many other jurisdictions, New York's courts have made clear their disfavor for non-compete agreements, noting that they inherently impinge on a person's ability to change jobs, perhaps to earn more money, and remain in their chosen field.
That said, there still are some limited instances where a New York court, unlike some other jurisdictions, such as California, will look to enforce a non-compete.
Typically, those circumstances are limited to key employees that are "unique."
Why New York's Courts Won't Enforce a Non-Compete Against Non-Unique Employees
In truth, New York's courts, for the reason set forth above, only grudgingly allowed non-competes to be enforced at all. But, they acnkowledged, there are some instances where an employer has a legitimate interest in keeping an employee from leaving to go work for an arch-competitor. And that, i.e., the employer's legitimate interest, is the primary underlying factor in determining the enforceability of these kinds of agreements.
As a result, when an employee is truly irreplaceable, and was paid a premium to retain the company's truly confidential, proprietary information secret, there is a fair chance that a New York court will uphold his non-compete.
Conversely, this also means that a New York court should, more often than not, decline to enforce the non-compete against a non-unique employee.