Cengage Advantage Books: Fundamentals of Business Law Today 10th Edition by Roger LeRoy Miller

تمرين 20

FACTS Brown Brown, Inc., is a firm of insurance intermediaries-that is, insurance agents, brokers, and consultants-in New York City. Brown hired Theresa Johnson to provide actuarial analysis. On her first day of work, Johnson was asked to sign a nonsolicitation covenant, which prohibited her from soliciting or servicing any of Brown's clients for two years after the termination of her employment. This covenant specified that if any of its provisions were declared unenforceable, they should be modified and then enforced "to the maximum extent possible." Less than five years later, Johnson's employment with Brown was terminated, and she went to work for Lawley Benefits Group, LLC. Brown filed a suit in a New York state court against Johnson, seeking to enforce the nonsolicitation covenant. Johnson filed a motion to dismiss Brown's complaint. The court ruled in Brown's favor, and Johnson appealed.
ISSUE Was Brown's covenant not to compete too broad to be enforced?
DECISION Yes. The New York Supreme Court reversed the lower court's ruling and granted Johnson's motion to dismiss Brown's action with respect to the nonsolicitation covenant, concluding that Brown's covenant was overbroad.
REASON A nonsolicitation or noncompete agreement is overbroad if it prohibits an employee from soliciting or providing services to clients "with whom the employee never acquired a relationship through his or her employment." In this case, the covenant sought to restrict Johnson from soliciting or servicing any of Brown's clients for two years after the termination of her employment, without regard to whether she had had a relationship with those clients. This restriction rendered the covenant unenforceable.
In addition, the covenant could not be partially enforced, despite its provision to the contrary. The possibility of partial enforcement of such agreements might encourage employers to impose unreasonable restrictions without regard to the risk that a court might void the entire agreement. In fact, here, the provision for partial enforcement demonstrated that Brown had imposed the covenant in bad faith, knowing that it was too broad. The court also emphasized that Johnson was not presented with the covenant until her first day of work and received no benefit for signing it beyond her continued employment.
FOR CRITICAL ANALYSIS-Legal Environment Consideration How might Brown have phrased its covenant not to compete with Johnson in such a way that it would have been enforced?