Court Refuses to Blue-Line Non-Compete Agreement

In another demonstration of New York’s inclination not to enforce non-compete agreements, two weeks ago, the Second Department refused to enforce the non-compete agreement of a professional, a class of people for whom a such an agreement has a better shot of enforcement than in most cases generally.

Plaintiff is a surgical group, maintaining seven offices in the New York metropolitan area. Plaintiff hired a surgeon who signed a three-year employment agreement. This agreement included a non-compete provision prohibiting competition for two years after termination and within a 10-mile radius from any of plaintiff’s offices and its affiliated hospitals. Defendant spent most of his time while working for plaintiff in Nassau County. Some four years later, defendant was fired.

Defendant thereafter began work at a hospital that was within the 10-mile zone but his office was not. Plaintiff filed suit claiming the breach of the non-compete agreement. That action was met with a successful motion to dismiss, which plaintiff appealed.

The Second Department first addressed the general principles which militate against enforcing non-compete agreements. Generally, any restriction on an individual’s ability to work in his chosen field is disfavored. Exceptions may be employed where the restriction is reasonable in time and area, which means that it is limited to protecting the legitimate interests of the employer, is not overly burdensome to the employee, and does not injure the public as a whole. As applied to professionals, however, there is a bit more flexibility in considering the employer’s needs and concerns, but it is a fact-specific analysis. Here, the court found that the 10-mile radius was overbroad and would prevent defendant from working as a surgeon. With that, the court refused to enforce the non-compete provision.

The court also affirmed the lower court’s refusal to “modify,” or blue-line, the restriction rather than invalidating it. Partial enforcement of the non-compete may be permitted, held the court, but only where the employer did not overreach in its implementation of the restrictive covenant and otherwise did not engage in “‘anti-competitive misconduct.’” Plaintiff did not make that showing, instead arguing that the provision should be modified simply because it could. In the court’s words

The plaintiff has not demonstrated, or even argued, an absence of anticompetitive misconduct on its part, asserting instead that because the restrictive covenant can be partially enforced, it should be. The fact that the covenant is clearly overbroad casts doubt on the plaintiff’s good faith in imposing it. Moreover, it is undisputed that the plaintiff, from a superior bargaining position, required [defendant] to sign the employment agreement as a prerequisite to being hired, and it refused to negotiate the covenant.

At the end, without even addressing the fact that his office was outside of the restricted zone, the court refused to enforce any part of the surgeon’s non-compete agreement.

As seen here, dealing with non-compete restrictions, on either end, is a delicate and fact-intensive endeavor. One misstep can undermine a party’s effort to enforce or defeat such a provision.

Long Island Invasive Surgery, P.C. v. St. John’s Episcopal Hospital.

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