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When New York Courts Won't Enforce a Key Employee's Non-Compete Agreement

As should be evident from the title of "Why Restraining Orders Are So Important in a New York Non-Compete Case," TROs, or injunctions, are often a critical component of litigation in New York arising out of the purported violation of a non-solicitation or non-compete clause by a former key employee.

 

To be sure, there are several factors that go into a court's determination of whether to uphold, or enforce, the non-compete clause under New York law. This article is focused on one such element:


Absent evidence of actual loss of clients or business, can a plaintiff still prevent this "key employee" from working for a competitor?

 

To that end, New York's courts have stated as follows:

 

"An employee's mere "knowledge of the intricacies of [a former employer's] business operation" is not a protectable interest sufficient to justify enjoining the employee "from utilizing his knowledge and talents in this area." Reed, Roberts Assocs., Inc. v. Strauman, 40 N.Y.2d 303 (1976); see Tradition Chile Agentes de Valores LTDS v. ICAP Sec. USA LLC, No. 09 Civ. 10343, 2010 WL 185656 at *3 (S.D.N.Y. Jan. 12, 2010) ("A party seeking an injunction must provide evidentiary support of ongoing damage to its operations, reputation or goodwill")."

 

In other words, the standard for deeming an employee "unique," and therefore subject to being enjoined from working for a competitor in the same industry is "high," as the employer will be required to show that the employee's replacement is essentially "impossible." International Creative Management, Inc. v. Abate, No. 07 Civ. 1979, 2007 WL 950092 at *6 (S.D.N.Y. Mar. 28, 2007). Consequently, another Federal Court in New York stated that "[M]ere speculation that the loss of a valuable employee will result in [irreparable harm] is insufficient to warrant an injunction."