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What Happens When Your Employment Contract Expires in New York

One of the most interesting areas where the doctrines of breach of contract and non-compete agreements intersect under New York law is with respect to employment agreements, particularly those that contain a non-compete or non-solicitation clause prohibiting the employee from poaching the employer's clients or employees for a certain amount of time after the agreement expires.

 

This has often led to the question of what happens when the employment agreement is for a limited term, for example, one year, and neither side affirmatively renews the agreement? This question inherently has many practical implications, particularly where the employee departs in a subsequent year, and the former employer seeks to hold that employee to his post-employment non-compete. At first blush, the employee can argue that he should no longer be bound by the non-compete, because its terms expired in accordance with the literal terms of his employment agreement.

 

But is he right?

 

Fortunately, New York's courts have shed some light on this issue.

 

Under New York law, "[w]hen an agreement expires by its terms, if, without more, the parties continue to perform as theretofore, an implication arises that they have mutually assented to a new contract containing the same provisions as the old." Martin v. Campanaro, 156 F2d 127 (2nd Cir. 1946) cert denied 329 US 759 (1946). See also, North Am. Hyperbaric Ctr. v. City of New York, 198 AD2d 148 (1st Dept 1993).

 

In other words, New York's courts have recognized the realities on the ground of the real world, where people may simply not get around to officially renewing an agreement that all sides understand - and act accordingly - to still be in effect.

 

A word of caution is in order here, however: "[T]he presumption is one of fact and may be rebutted." Borne Chemical Co., Inc. v. Dictrow, 85 AD2d 646, 648 (2nd Dept 1981).