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New York Non-Compete Agreements: Court Rules They Are Assignable

Posted on Jan 01, 2016

In a recent ruling, a federal court decided that under New York law, the buyer of a business may be able to enforce non-competition agreements against employees who previously worked for the seller of the business. This ruling involves the lawsuit brought by the new owner of Milso, a casket company, against its employees. The purchaser of the business alleges the following:

  • In 2003, Milso’s employees signed an employment agreement which, by its terms, is governed by New York law.
  • The employment agreement contained confidentiality, non-solicitation, and non-competition covenants.
  • These covenants were to be enforceable for 18 months following termination of employment.
  • In 2005, the assets of the company were sold.
  • As part of the sale, all employment agreements were assigned to the new owner.
  • At the closing of the purchase and sale transaction, the seller terminated the employees and the buyer rehired them.
  • The buyer specifically asked each of the employees to acknowledge that they remained subject to the covenants.
  • Three years later, two employees left the company and went to work for a competitor.
  • Those two employees had not signed the acknowledgment regarding the covenants.

The purchaser of Milso filed suit against the former employees. In response, the employees asserted that they had been terminated at the closing of the sale of the business. Since that closing occurred more than 18 months prior to when they began working for the competitor, they asserted that the non-compete agreement should not apply.

In the recent decision, the court held that since the parties to the employment agreements intended for the agreements to be assignable, the covenants contained in the agreements were enforceable against any employees who accepted continuous employment offered by the purchaser that was comparable to their employment with the seller.

Contact an experienced New York non-compete lawyer today at (888) 497-3410 for more information about non-compete agreements and other business litigation matters.

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