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The Most Powerful Way to Defeat a Non-Compete Agreement in New York

Although there are many ways to, for lack of a better term, "poke holes" in a non-compete agreement, more often than not, those attacks may not prove decisive - at least not under New York law. And the reason for this is relatively straightforward: the courts often reserve the right to "blue-line" the agreement, which means that the court can re-write the offending provisions of the agreement to be more in line with accepted standards, such as by reducing the length of a non-compete from 5 years to 18 months, or by limiting the territorial restriction of a non-compete to a 100 square-mile radius.

 

But there is another way of challenging a non-compete agreement that can potentially strike a fatal blow to a plaintiff's attempt to enforce it: where the plaintiff fired the defendant "without cause."

 
A Federal Court in New York recently explained the rationale behind this rule as follows:

"New York courts 'will not enforce a non-competition provision in an employment agreement where the former employee was involuntarily terminated.' SIFCO Indus., Inc. v. Advanced Plating Techs., Inc., 867 F.Supp. 155, 158 (S.D.N.Y.1994); see Post v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 48 N.Y.2d 84, 421 N.Y.S.2d 847, 397 N.E.2d 358, 361 (1979). 'An essential aspect [of enforceable restraints on employee mobility] is the employer's continued willingness to employ the party covenanting not to compete.' SIFCO, 867 F.Supp. at 158 (quoting Post, 421 N.Y.S.2d 847, 397 N.E.2d at 360).  Enforcing a noncompetition provision when the employee has been discharged without cause 'would be ‘unconscionable’ because it would destroy the mutuality of obligation on which a covenant not to compete is based.' Morris v. Schroder Capital Mgmt. Int'l, 445 F.3d 525, 529–30 (2d Cir.2006) (quoting Lucente v. IBM Corp., 310 F.3d 243, 254–55 (2d Cir.2002)).