Posts tagged with "Connecticut labor law"

How to Test a Non-Compete for Reasonableness and it’s Overall Enforceability

THE TEST FOR REASONABLENESS/ENFORCEABILITY OF A NON-COMPETE

The application of basic contract principles is just one step in the process of enforcement of a covenant not to compete. Once the court has determined that the parties properly executed a non-compete agreement, it must analyze the enforceability of the agreement’s provisions. Connecticut has developed a five-prong test to assess the enforceability of a restrictive covenant. It examines the reasonableness of the restrictions to determine how enforcement would impact the relevant parties: the employer, the employee, and the public at large. When determining the enforceability of a Connecticut non-compete agreement, the court will look to:

  1. the reasonableness of the time restriction,
  2. the reasonableness of the geographical restriction,
  3. the degree of protection afforded to the employer,
  4. whether it unnecessarily restricts the employee’s ability to pursue his career, and lastly
  5. the degree to which it interferes with the interests of the public.

This five-prong test used by Connecticut courts is disjunctive rather than conjunctive, meaning that a non-compete agreement can be deemed unenforceable and invalidated if it negatively impacts even a single factor. A non-compete agreement is analyzed in its entirety when a court is determining its enforceability, but a single unreasonable provision can be sufficient to invalidate the entire agreement and preclude enforcement. While certain factors may assume greater importance, the legal analysis of non-compete agreements in Connecticut shows that each factor is essentially on equal footing and of equal weight when deciding the enforceability of a restrictive covenant.

The factors used in the application of the five-prong reasonableness test can be divided into two categories: enumerated restrictions and subsequent consequences of the express restrictions. Time and geographical restrictions (factors #1 and #2) generally constitute crucial provisions in the non-compete and establish the parameters for what post-termination activities are and are not permissible for the employee. Analysis of the remaining factors involves an assessment of the consequences of the enumerated restrictions and how they impact the parties and the public.

A. Temporal Limitation

The pertinent time/duration will prohibit an employee from engaging in certain enumerated activities for a specific period of time. The reasonableness of a particular time restriction will vary from case to case and will depend heavily on the particular facts of the case and the specific characteristics of the position and industry. A fifteen-year restriction may be appropriate and enforceable in one case while it would be excessive and unreasonable in another. The nature of the industry/profession that is the subject of a non-compete agreement is critical to determining whether a contractual time restriction is reasonable and enforceable. For example, restrictive covenants in the funeral services industry can be longer due to the familial return rate and referral characteristics while courts have held that restrictive covenants in the software industry must be shorter because of the constant and “rapid changes in the software industry.”

The reasonableness and enforceability of the time restriction can also be a function of the enumerated geographical restriction. The interrelationship between these two aspects of a covenant not to compete can be very important in determining its overall enforceability. A time restriction that on its face seems unreasonable may in fact be completely reasonable when you take into account the geographical restriction. A lengthy time restriction on competing activities can be reasonable under circumstances where it is paired with a narrow geographical restriction. A seemingly unreasonable time restriction may be deemed reasonable under the circumstances when “read in conjunction [with] the narrow geographic restriction” contained in the agreement.

B. Geographic Limitation

For many employees, the geographical restriction can be more problematic and of greater concern than the time restriction. The courts in this state have repeatedly asserted that “the general rule is that the application of a restrictive covenant will be confined to a geographic area which is reasonable in view of the particular situation.” The court analyzes the geographic restriction in the same manner as it evaluates the time restriction- the geographic terms are analyzed in the context of the specific facts of the situation and the particular industry in which the employer and employee are engaged. Non-compete agreements executed under Connecticut law can be invalidated when a geographic restriction is so broad that it severely limits or prevents a former employee “from carrying on his usual vocation and earning a livelihood, thus working undue hardship.”

A valid restrictive covenant will clearly define the geographic restriction prohibiting the employee upon termination from engaging in competing business activities within a specific area. The total lack of specified geographical restriction creates an unintended consequence in the form of a global restriction on competition, an effect that the courts consider “patently and grossly unreasonable.” Courts are likely to invalidate a non-compete agreement for lack of a defined geographic restriction regardless of whether that characteristic of the agreement was intentional or purely by mistake. If intentional, a global restriction on competition is unconscionable and unenforceable under Connecticut law. Courts will also refuse enforcement of such a non-compete if the lack of geographical restriction was a mistake or error in drafting and execution. Employers should not be allowed the benefit of enforcing the agreement merely because of an unintended, ambiguous clause that was the product of sloppy drafting of the agreement.

(i) Weighing Respective Consequences

A crucial component in analyzing the enforceability of a geographical restriction is the potential consequences for the employer and the employee. Employers have the right to protect themselves but not by seeking to impose excessive and unreasonable restrictions that needlessly harm or unduly restrict former employees. A court may deny enforcement when the restrictive covenant goes beyond protecting the employer’s legitimate interest in existing customer relationships and seeks to exclude all competition in a very large territory where the employer conducts or could possibly conduct business.

Geographical restrictions, regardless of duration, that go beyond what is required for fair protection of the employer are unenforceable on the grounds that they are unreasonable restraints of trade in direct contravention of Connecticut law. The availability of future employment for the former employee is a major factor in a court’s determination of the enforceability of a geographical restriction. A restriction will be upheld when the circumstances demonstrate that there is ample opportunity for the employee to obtain new employment outside of the contractually prohibited area without causing undue hardship(s).

Smaller geographical restrictions are generally easier to assess and enforce but this is not to say that a court will automatically deny enforcement of a restriction that on its face establishes a large prohibited area. Courts have enforced non-compete agreements containing a large geographical restriction clause when there are other clauses that narrow the actual prohibited area. One such case involved a restrictive covenant that prohibited competing activities for one year following termination within the area described as the “Standard Metropolitan Statistical Areas of [the] Eastern Seabord,” an area that includes metropolitan areas from Portland, Maine to Miami, Florida, and home to roughly 36% of the country’s population.

This area, at face value, is excessive and would normally be unconscionable to enforce, but the court ultimately held that the geographical restriction clause was valid and enforceable because subsequent clauses placed restrictions on the area and severely limited its impact on the employee by stating that the restriction pertained only to the employer’s clients within the six months prior to termination and on who’s account the former employee had personally worked. This was sufficient to limit the effect of the stated geographical restriction and render it enforceable in light of the peculiar circumstances surrounding the case.

When contesting the enforceability of geographical or time restrictions, the employee ultimately bears the burden of proving that a restriction is “too broad”, “unreasonable,” or “excessive.” Under Connecticut law, the challenging party bears the burden of demonstrating that the non-compete is unenforceable. The employer generally has the benefit of a rebuttable presumption that the employee must overcome to show that a restriction is unreasonable and therefore unenforceable.

C. Fair Protection to the Employer

The third prong in the test for reasonableness and enforceability of a non-compete agreement is an analysis of the fair degree of protection afforded to the employer. The courts in Connecticut have a long-standing policy of enforcing non-competes in order to protect an employer’s interests and have long recognized that a restrictive covenant is a valuable business asset that is entitled to protection. While the employer’s interests are a valid concern, their protection cannot come at a cost of occupational ruin of former employees. The general rule with regard to analyzing the fair degree of protection for the employer is that contracts in restraint of trade “should afford only a fair protection to the interest of the party in whose favor it is made, and must not be so large in its operation as to interfere with the interests of the public [and the former employee].” The court balances the equities for the parties involved in the legal action. Only after a court has identified and weighed the competing equities of the parties can it conclude that “although some hardship would result to the individual defendants [former employees] as a consequence of this injunction, it would not be greatly disproportionate to the plaintiff’s [employer’s] injury.” A court’s ruling will inevitably favor one party over the other, but this prong ensures that the unsuccessful party does not experience extreme and unduly harsh consequences.

D. The Ability to Secure Future Employment

The fourth prong in the test to ascertain the enforceability of a non-compete agreement is ensuring that the contractual provisions do not unnecessarily restrict the employee’s ability to pursue his or her career through securing appropriate employment upon termination. The general rule is that employers are legally permitted to protect themselves in a reasonably limited market area but may not overreach to the degree that the restriction prevents the former employee from practicing his or her trade in order to make a living. Connecticut courts believe the interests of the employee should also be protected and that terms of a restrictive covenant become unenforceable when they block him from “pursuing his occupation and [is] thus prevented from supporting himself and his family.” This restraint of trade is a clear violation of Connecticut law and public policy that militates against unreasonable restrictive covenants. Courts should narrowly read and interpret non-compete agreements and the clauses contained therein because “sound public policy considerations strongly militate against sanctioning the loss of a person’s livelihood.” Despite this general policy, employees remain free to covenant to refrain from competing activities in exchange for an employment benefit, a promise that is enforceable if the courts conclude that the agreement is reasonable.

E. The Public Interest

The final prong of the enforceability test is determining whether the agreement and its provisions interfere with the interests of the public. In order to be valid and enforceable, a non-compete agreement must not have a widespread detrimental effect on the public, particularly with respect to consumers. It is a fundamental tenant of Connecticut public and legal policy that agreements and specific contractual clauses cannot deny the public access to important goods or services. Therefore, the extent of the agreement’s effect on the public must be taken into account when determining whether to enforce a restrictive covenant. Courts will examine the provisions of the agreement, keeping in mind that “the determinant is not whether the public’s freedom to trade has been restricted in any sense, but rather whether that freedom has been restricted unreasonably.” Thus, a non-compete agreement may be invalidated and enforcement denied on the grounds of the public’s interests only if interference with those interests is so significant as to be classified by the adjudicating court as “unreasonable.”

One of the chief concerns with this prong of the enforceability test is preventing monopolistic activities within certain public segments of the economy. The courts have the authority to examine the scope and severity of a non-compete agreement’s effect(s) on the public as well as the “probability of the restrictions creating a monopoly in the [relevant] area of trade.” Upon examination of the facts and the possible consequences of the restrictive covenant, Connecticut courts may deny enforcement where the agreement runs contrary to public policy and the contractual restraints are unreasonable.

This enforceability test, as articulated in and enforced under Connecticut case law, is designed to protect the legitimate interests of both the employee and the employer. It is utilized in a manner that ensures that the consequences of a restrictive covenant are reasonable, appropriate for the specific circumstances, and not punitive. The enforceability test attempts to control and limit the detriments incurred by a party to the action and protect it from oppressive restrictions. In establishing enforceability, the core principle is the notion that a party should not be subject to excessive and unreasonable restrictions that were “not [designed] to protect legitimate business interests, but rather to prevent [the employee] from working for competitors.”
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Our employment law firm in Westport Connecticut serves clients with discrimination, non-compete, and general labor law issues from all over the state including the towns of Bethel, Bridgeport, Brookfield, Danbury, Darien, Easton, Fairfield, Greenwich, Monroe, New Canaan, New Fairfield, Newton, Norwalk, Redding, Ridgefield, Shelton, Sherman, Stamford, Stratford, Trumbull, Weston, Westport, and Wilton. We have the best employment and labor law attorneys in CT on staff that can help with your Connecticut or New York education issues today.

If you have questions regarding non-compete agreements or any employment matter, contact Joseph Maya at 203-221-3100 or by email at JMaya@MayaLaw.com.

Military Law & Policy Poses New Challenge for Sexual Harassment Law

Several years ago, West Point cadets initiated first-year students, including young women, by teaching them to sing the following chant while marching: ”I wish that all the ladies were holes in the road and I was a dump truck. I’d fill ’em with my load.” Years before that, Air Force Academy cadets sang similar refrains marching to and from training events. One chant described taking a ”chain saw” to cut a woman ”in two” so that they could keep ”the bottom half and give the top to you.” Two years ago, a West Point investigation revealed that a cadet on the rugby team had instructed a teammate to ”get your girl on a leash.”

These incidents expose the entrenched sexism that is tolerated at the three military services academies overseen by the Department of Defense — West Point, the Naval Academy and the Air Force Academy. They also help explain repeated reports that the academies have not taken complaints of sexual assault and harassment seriously. The pattern is familiar: Each revelation incites an outcry, the academies announce reforms and the schools’ efforts prove ineffective. What endures are the chants, and the institutional misogyny they reveal.

We are student members of a legal clinic at Yale Law School representing a nonprofit group that aims to eradicate gender discrimination in the military. The Service Women’s Action Network, founded in 2007 by female veterans of the Marine Corps and the New York Army National Guard, has long objected to the way apathetic administrators at the service academies have let students get away with harassment and assault.

Part of the problem is that the military service academies are not subject to the laws that have helped students at civilian schools force their colleges to shape up. Title IX requires almost all American schools that receive federal money to eliminate sex discrimination, including sexual violence. Students can file complaints with the Department of Education to allege discriminatory policies or practices on their campuses, including the mishandling of sexual assault and harassment claims. The Department of Education has opened investigations into more than 100 schools, helping to set off an important national conversation on campus assault.

But Congress exempted the service academies when it passed Title IX in 1972. Perhaps legislators feared imposing Department of Education oversight onto military affairs. Maybe they failed to even consider the possibility of sex discrimination at the academies, which did not admit women until four years later. Whatever the reason, the result of Congress’s omission is that the approximately 2,700 female cadets and midshipmen are deprived of a fundamental protection necessary for their safety and equality.

Students on military campuses can file individual complaints of sex discrimination and misconduct within their academies, which are ultimately decided by various levels within the chain of command. But they have no one to turn to when their academies mishandle their reports or engage in other practices that hurt women. If a cadet or midshipman who reports sexual harassment and discrimination is mistreated by her academy, she can appeal the decision within the academy system and her chain of command, but she can’t appeal the manner in which such decisions are made. Her civilian peers, by contrast, can bring such claims to the Department of Education.

As it is, very few cadets and midshipmen come forward to report sex discrimination, but not because they aren’t experiencing it. According to the Department of Defense’s own surveys and data, 8 percent of women at the military academies were sexually assaulted last year, almost half faced serious sexual harassment and nearly 90 percent experienced other forms of sexism and discrimination. Yet fewer than 5 percent of the roughly 1,400 women who were sexually assaulted or harassed reported what had happened to them within their existing systems.

There is a simple way for President Obama, in his capacity as commander in chief, to put an end to this impunity. To provide cadets and midshipmen with a meaningful way to challenge sex discrimination at their academies, he should issue an executive order modeled on Title IX’s legal protections. This order would, in effect, borrow Title IX’s prohibition against sex discrimination and create a pathway for Title IX-like complaints within the Defense Department. The president should also order the Pentagon’s inspector general to enforce this anti-discrimination rule at the academies.

Over the past decade, public outcry about sexual assault on college campuses and in the military has spurred legal reform. But one group at the intersection of these issues — women at the service academies — are still waiting for meaningful change. Last year, while announcing a new task force on gender-based violence on civilian campuses, Mr. Obama spoke to survivors directly: ”I’ve got your back,” he said. Female cadets and midshipmen volunteer to serve our country — the president should have their backs, too.

If you feel you have been mistreated by your employer or in your place of employment and would like to explore your employment law options, contact the experienced employment law attorneys today at 203-221-3100, or by email at JMaya@mayalaw.com. We have the experience and knowledge you need at this critical juncture. We serve clients in both New York and Connecticut including New Canaan, Bridgeport, White Plains, and Darien.

This case was not handled by our firm. However, if you have any questions regarding this case, or any employment law matter, please contact Joseph Maya at 203-221-3100 or by email at JMaya@mayalaw.com.


Source: Ashley Anderson, Elizabeth Deutsch, Stop Assaults on Military Campuses, The New York Times, (May 12, 2015) available at http://www.nytimes.com/2015/05/12/opinion/stop-assaults-on-military-campuses.html

***All posts for the MayaLaw.com blog are created as a public service for the community. This case overview is intended for informational purposes only, and is not a solicitation of any client.***

Teacher Evaluations in Connecticut

If you have a question or concern about school administration, federal standards, or the overall rights of a student or teacher, please feel free to call the expert education and employment law attorneys at Maya Murphy, P.C. today at (203) 221-3100 or JMaya@Mayalaw.com.

This case was not handled by our firm. However, if you have any questions regarding this case, or any education matter, please contact Joseph Maya at 203-221-3100 or by email at JMaya@MayaLaw.com.

Under Connecticut General Statute §10-151b, each year teachers in Connecticut must be evaluated by either the Superintendent of Schools, or by someone appointed by the Superintendent.  The teacher’s evaluation shall include, but is not necessarily limited to, strengths, areas needing improvement, strategies for improvement and multiple indicators of student academic growth.  In the event that a teacher does not receive a summative evaluation during the school year, the teacher must receive a “not rated,” designation for that school year.  The Superintendent shall report both the status of teacher evaluations to the local or regional Board of Education on or before June first of each year, and the status of the implementation of the teacher evaluation and support program, including the frequency of evaluations, aggregate evaluation ratings, the number of teachers who have not been evaluated, and other requirements as determined by the Department of Education, to the Commissioner of Education on or before September fifteenth of each year.  If a teacher believes that the proper procedure was not followed during their review and/or evaluation, the teacher should look to the collective bargaining agreement maintained within the School District, as Connecticut defers to such agreements for grievance procedures on evaluations.

Each local and regional Board of Education must adopt and implement a teacher evaluation and support program.  If a local or regional Board of Education is unable to develop a teacher evaluation and support program through mutual agreement with a Professional Development and Evaluation Committee, then the Board of Education and the Professional Development and Evaluation Committee shall consider the Model Teacher Evaluation and Support Program adopted by the State Board of Education as a rubric and can adopt the model if agreed upon.  C.G.S. §10-151b(b).

As of July 1, 2012, the State Board of Education has adopted, in consultation with the Performance Evaluation Advisory Council, guidelines for a Model Teacher Evaluation and Support Program. Such guidelines include, but are not limited to:

(A) the use of four performance evaluations designators: Exemplary, Proficient, Developing and Below Standard;

(B) the use of multiple indicators of student academic growth and development in teacher evaluations;

(C) methods for assessing student academic growth and development;

(D) a consideration of control factors tracked by the state-wide public school information system that may influence teacher performance ratings, including, but not limited to, student characteristics, student attendance and student mobility;

(E) minimum requirements for teacher evaluation instruments and procedures, including scoring systems to determine Exemplary, Proficient, Developing and Below Standard ratings;

(F) the development and implementation of periodic training programs regarding the teacher evaluation and support programs to be offered by the local or regional Board of Education or Regional Educational Service Center for the school district to teachers who are employed by such local or regional Board of Education, whose performance is being evaluated, and to administrators who are employed by such local or regional Boards of Education and who are conducting performance evaluations;

(G) the provision of professional development services based upon the individual’s or group of individuals’ needs that are identified through the evaluation process;

(H) the creation of individual teacher improvement and remediation plans for teachers whose performance is developing or below standard, designed in consultation with such teacher and his or her exclusive bargaining representative for certified teachers and that (i) identify resources, support and other strategies to be provided by the local or regional board of education to address documented deficiencies, (ii) indicate a timeline for implementing such resources, support, and other strategies, in the course of the same school year as the plan is issued, and (iii) include indicators of success including a summative rating of proficient or better immediately at the conclusion of the improvement and remediation plan;

(I) opportunities for career development and professional growth; and

(J) a validation procedure to audit evaluation ratings of exemplary or below standard by the department or a third-party entity approved by the department.

C.G.S. §10-151b(c)(1).

After a teacher has received their performance evaluation, Connecticut General Statute §10-151c ensures confidentiality from the public. “Any records maintained or kept on file by the Department of Education or any local or regional board of education that are records of teacher performance and evaluation shall not be deemed to be public records…provided that any teacher may consent in writing to the release of such teacher’s records by the department or a board of education.”  However, Connecticut does provide certain exceptions to the confidentiality rule, providing that records maintained or kept on file by the Department of Education or any local or regional Board of Education that are records of the personal misconduct of a teacher, shall be deemed to be public records and shall be subject to disclosure in certain circumstances.  Further, disclosure of such records of a teacher’s personal misconduct shall not require the consent of the teacher.

Despite confidentiality, the teacher is allowed access to his or her personnel file and its contents under Connecticut General Statute §10-151a.  The teacher shall be entitled to knowledge of, access to, and, upon request, a copy of supervisory records and reports of competence, personal character and efficiency maintained in their personnel file with reference to evaluation of performance.  If a teacher would like to investigate the contents of their personnel file, that is their right under Connecticut law, but must make a request to the Board of Education of the town in which he or she is employed.

This case was not handled by our firm. However, if you have any questions regarding this case, or any education matter, please contact Joseph Maya at 203-221-3100 or by email at JMaya@MayaLaw.com.

If you are an employer or teacher and are faced with the possibility of termination, contact the experienced employment law attorneys today at 203-221-3100, or by email at JMaya@mayalaw.com. We have the experience and knowledge you need at this critical juncture. We serve clients in both New York and Connecticut including New Canaan, Bridgeport, White Plains, and Darien.


Source: C.G.S. §10-151

Employer Remedies for Violations of Restrictive Covenants in New York: Breach of Fiduciary Duty & Aiding and Abetting Breach of Fiduciary Duty

An agreement containing a restrictive covenant is an agreement in which one party agrees to limit his conduct in exchange for a benefit.  Two common types of restrictive covenants include agreements not to compete and agreements not to solicit.  A non-competition agreement is a contract that an individual, often an employee, enters into with another party, often an employer, in which the individual agrees not to offer or engage in services that are competitive with the other party.  A non-solicitation agreement is a contract in which an individual, often an employee, enters into with another party, often an employer, in which the individual agrees not to poach employees and/or clients of the other party.  Non-competition and non-solicitation agreements may be beneficial to employers because they offer protection for their business models, clients, and/or employees, which they may have spent years developing and training.

The laws governing non-competition and non-solicitation agreements vary from state to state.  New York law generally recognizes these restrictive covenants as enforceable to the extent they are reasonable.  For more information as to whether or not your restrictive covenants are enforceable, see Enforceability of Restrictive Covenants in New York. 

There are several types of claims available to employers for a violation of a restrictive covenant agreement that are commonly recognized by New York courts.  See Employer Remedies for Violations of Restrictive Covenants in New York .  One such claim is for breach of fiduciary duty by the party whom the employer is seeking to enforce the restrictive covenant against.

In order to assert a claim for breach of fiduciary duty, an employer must first establish that a fiduciary relationship exists between the employer and the party against whom it is trying to enforce the restrictive covenant.  A fiduciary is an individual who maintains a certain legal or ethical responsibility as to another person or entity.  Since fiduciaries are individuals in positions of great trust, they are legally bound to conduct themselves with a higher level of care when it comes to their fiduciary relationship and the duties of their position, as compared to individuals conducting business at arm’s length or otherwise in the absence of a fiduciary relationship.  Fiduciaries, for example, owe their principal (here, the employer) a duty of loyalty.  A duty of loyalty requires that the fiduciary act in the best interest of the employer and avoid all personal and professional conflicts.

If the employer is able to demonstrate that the individual is or was a fiduciary at the time of breach, thereby establishing a fiduciary relationship, the employer must then demonstrate that the fiduciary engaged in misconduct, which, in turn, directly caused damage to the employer.  Pokoik v Pokoik, 115 AD3d 428, 982 NYS2d 67 (1st Dept 2014); Deblinger v Sani-Pine Products Co., Inc., 107 AD3d 659, 967 NYS2d 394 (2d Dept 2013); Kurtzman v Bergstol, 40 AD3d 588, 835 NYS2d 644 (2d Dept 2007).  If a fiduciary owes a duty of loyalty to an employer, directly competing with the employer or soliciting its employees and clients to leave the employer may be deemed a violation of this duty.

It must be noted that New York courts decline to recognize a breach of fiduciary duty claim if it is not separate and distinct from a contractual duty, which may be pursued via a breach of contract claim.  Brooks v Key Trust Co. Nat. Ass’n, 26 AD3d 628, 809 NYS2d 270 (3d Dept 2006); William Kaufman Organization, Ltd. v Graham & James, LLP, 269 AD2d 171, 703 NYS2d 439 (1st Dept 2000); Kassover v Prism Venture Partners, LLC, 53 AD3d 444, 862 NYS2d 493 (1st Dept 2008); Sally Lou Fashions Corp. v Camhe-Marcille, 300 AD2d 224, 755 NYS2d 67 (1st Dept 2002); Mandelblatt v Devon Stores, Inc., 132 AD2d 162, 521 NYS2d 672 (1st Dept 1987).

A related claim that an employer may have available to it is a claim for aiding and abetting a breach of fiduciary duty.  This is the type of claim that an employer would assert against a party who encouraged or assisted a fiduciary to breach one of their duties.  The party accused of aiding and abetting need not have any fiduciary duty to the employer.  In order to assert such a claim, an employer must establish 1. A breach of a fiduciary duty by the fiduciary; 2. That the defendant knowingly induced or participated in the breach; and 3. That the employer suffered damages as a result of the breach.  Bullmore v Ernst & Young Cayman Islands, 45 AD3d 461, 846 NYS2d 145 (1st Dept 2007); Global Minerals and Metals Corp. v Holme, 35 AD3d 93, 824 NYS2d 210 (1st Dept 2006); Kaufman v Cohen, 307 AD2d 113, 760 NYS2d 157 (1st Dept 2003).  A defendant knowingly participates in a breach of a fiduciary duty if he provides substantial assistance to the violating fiduciary.  “Substantial assistance” has been defined by the courts to mean that a defendant affirmatively assists, helps conceal or fails to act when required to do so, thereby enabling the breach to occur.  Sanford/Kissena Owners Corp. v Daral Properties, LLC, 84 AD3d 1210, 923 NYS2d 692 (2d Dept 2011); Kaufman, 307 AD2d 113, 760 NYS2d 157.

If you are an employer seeking to enforce a restrictive covenant or a party who is subject to a restrictive covenant, contact Maya Murphy, P.C. at (203) 221-3100 for a complimentary consultation to discuss your case.

Employer Remedies for Violations of Restrictive Covenants in New York: Unfair Competition

An agreement containing a restrictive covenant is an agreement in which one party agrees to limit his conduct in exchange for a benefit.  Two common types of restrictive covenants include agreements not to compete and agreements not to solicit.  A non-competition agreement is a contract that an individual, often an employee, enters into with another party, often an employer, in which the individual agrees not to offer or engage in services that are competitive with the other party.  A non-solicitation agreement is a contract in which an individual, often an employee, enters into with another party, often an employer, in which the individual agrees not to poach employees and/or clients of the other party.  Non-competition and non-solicitation agreements may be beneficial to employers because they offer protection for their business models, clients, and/or employees, which they may have spent years developing and training.

The laws governing non-competition and non-solicitation agreements vary from state to state.  New York law generally recognizes these restrictive covenants as enforceable to the extent they are reasonable.  For more information as to whether or not your restrictive covenants are enforceable, see Enforceability of Restrictive Covenants in New York. 

There are several types of claims available to employers for a violation of a restrictive covenant that are commonly recognized by New York courts.  See Employer Remedies for Violations of Restrictive Covenants in New York.  One such claim is unfair competition.  Unfair competition occurs when an individual or entity utilizes dishonest or fraudulent methods to gain an unfair advantage in trade or commerce.  A common example of unfair competition is when one party duplicates the goods or services of another with the intent to confuse or deceive the market/customers, so as to increase its own sales.

“The essence of an unfair competition claim under New York law is that the defendant has misappropriated the labors and expenditures of another…Central to this notion is some element of bad faith.”  Vichy Spring Co. v Lehman, 625 F.2d 1037, 1044 (2d Cir. 1980).  In order to demonstrate bad faith, the employer must show that the defendant acted with a “dishonest purpose.”  Kalisch-Jarcho Inc. v City of New York, 448 NE.2d 413, 417 n.5 (N.Y. 1983).  Therefore, negligence or even recklessness is insufficient to demonstrate an unfair competition claim.  Abe’s Rooms, Inc. v Space Hunters, Inc., 833 N.Y.S.2d 138, 140 (2d Dept 2007).  There must be a showing that the defendant intentionally engaged in misconduct.

If an individual agrees to be bound by a non-competition agreement, but then subsequently violates the contract by engaging in dishonest or fraudulent business practices to compete with the employer, the employer may be able to assert an unfair competition claim, among others, if the above conditions are met.

If you are an employer seeking to enforce a restrictive covenant or a party who is subject to a restrictive covenant, contact Maya Murphy, P.C. at (203) 221-3100 for a complimentary consultation to discuss your case.

Employer Remedies for Violations of Restrictive Covenants in New York: Unjust Enrichment

An agreement containing a restrictive covenant is an agreement in which one party agrees to limit his conduct in exchange for a benefit.  Two common types of restrictive covenants include agreements not to compete and agreements not to solicit.  A non-competition agreement is a contract that an individual, often an employee, enters into with another party, often an employer, in which the individual agrees not to offer or engage in services that are competitive with the other party.  A non-solicitation agreement is a contract in which an individual, often an employee, enters into with another party, often an employer, in which the individual agrees not to poach employees and/or clients of the other party.  Non-competition and non-solicitation agreements may be beneficial to employers because they offer protection for their business models, clients, and/or employees, which they may have spent years developing and training.

The laws governing non-competition and non-solicitation agreements vary from state to state.  New York law generally recognizes these restrictive covenants as enforceable to the extent they are reasonable.  For more information as to whether or not your restrictive covenants are enforceable, see Enforceability of Restrictive Covenants in New York. 

There are several types of claims available to employers for a violation of a restrictive covenant that are commonly recognized by New York courts.  See Employer Remedies for Violations of Restrictive Covenants in New York.  One such claim is unjust enrichment.

Three elements must be asserted to establish a claim for unjust enrichment in New York; 1. The defendant derived a benefit; 2. The benefit that the defendant derived was at the plaintiff’s expense; and 3. The basic principles of fairness and equity require restitution.   The benefit derived by the defendant may be either intentional or unintentional.  For example, an employer can still assert a claim for unjust enrichment if the defendant received a benefit in error, rather than with malicious intent.

Often, employees and other individuals who are bound by restrictive covenants are given a benefit in exchange for agreeing to the restriction.  For example, an employee may be offered severance in exchange for agreeing not to compete with an employer upon separation from the employer.  An unjust enrichment claim is commonly asserted by employers when an individual violates their non-competition or non-solicitation agreement though they have received a benefit in exchange for compliance.  The relief for these types of claims often includes a return of the benefit bestowed on the violating party, among other relief that may be just and appropriate under the circumstances.

If you are an employer seeking to enforce a restrictive covenant or a party who is subject to a restrictive covenant, contact Maya Murphy, P.C. at (203) 221-3100 for a complimentary consultation to discuss your case.

Enforceability of Restrictive Covenants in New York

A non-competition agreement is a contract that an individual, often an employee, enters into with another party, often an employer, in which the individual agrees not to offer or engage in services that are competitive with the other party.  A non-solicitation agreement is a contract in which an individual, often an employee, enters into with another party, often an employer, in which the individual agrees not to poach employees or clients of the other party.  Non-competition and non-solicitation agreements may be beneficial to employers because they offer protection for their business models, clients, and/or employees, which they may have spent years developing and training.

The laws governing non-competition and non-solicitation agreements vary from state to state.  New York law generally recognizes non-competition agreements as enforceable to the extent they are reasonable.  To determine whether or not a non-competition covenant is reasonable, New York Courts apply a balancing test; Courts weigh the employee’s right to pursue employment utilizing the skills and knowledge he has acquired during his work experience that are important to his trade against the employer’s legitimate interest in protecting his business.  An example of a legitimate business interest is protecting the business from those who may try to pirate intellectual property for their own benefit.   Often these types of agreements limit the individual’s ability to engage in competitive work for a certain period of time in a certain geographic area, namely the market in which the other party offers their services.  The time period and/or geographic limitation are among the factors that a Court would review in assessing the reasonableness, and, therefore enforceability, of the provision.

New York Courts assess the reasonableness of a non-solicitation agreement by analyzing whether or not it serves a legitimate business interest of the employer.  For example, New York Courts have ruled that a non-solicitation agreement cannot prohibit a former employee from having contact with a business’s entire client base if the employee had not previously serviced the entire client base or otherwise maintained relationships with all clients.  This would be overly broad and fail to serve a legitimate business interest.

New York Courts have recognized four types of business interests that an employer may seek to shield by way of a restrictive covenant; i) protection of trade secrets, ii) protection of confidential customer information, iii) protection of an employer’s client base, and iv) protection against irreparable harm where an employee’s services are unique and extraordinary.  Silipos, Inc. v. D. Bickel, No. 05-cv-4356 (RCC), 2006 WL 2265055 at *3 (S.D.N.Y. 2006).

The New York Court of Appeals has stated that the restraint of these types of agreements shall be “no greater than is required for the protection of the legitimate business interest of the employer.”  BDO Seidman v. Hirschberg, 93 N.Y.2d 382, 388-389 (1999).   This means that these types of provisions cannot be unnecessarily broad or restrictive, particularly if the restriction does not serve to protect the business.  This analysis is very fact specific.  For example, in Good Energy, L.P. v. Kosachuk, 49 A.D. 3d 331, 332, 853 N.Y.S.2d 75 (1st Dep’t 2008), the Court ruled that a non-competition provision that restricted the employee from working anywhere in the United States was unenforceable because the employer only operated in eight states.  The court reasoned that restricting the employee from earning a living throughout the country, including states where the employer did not compete in the market, was unreasonable because, as to at least forty-two states, it did not serve to protect a legitimate business interest.  Alternatively, in Payment Alliance Intern., Inc. v. Ferreira, 530 F.Supp.2d 477 (S.D.N.Y. 2007), the court found the same territorial restriction enforceable because the employer did, in fact, operate throughout the United States.  Similarly, New York Courts have held that a restrictive period of six months is unenforceable in some cases while ruling that a restrictive period as long as five years is enforceable in another circumstance.

In addition to assessing the duration, geographic scope, and business interests served by these agreements, when evaluating the enforceability of these types of agreements, New York Courts assess whether or not the provisions protect the public interest.  For example, courts have ruled that it is injurious to the public when a physician is restricted from practicing for an extended period of time within a certain area.  However, this is not to say that all medical professionals are exempt from restrictive covenants; restrictive covenants are generally enforceable against medical and dental professionals if they are reasonably limited in time and geographic scope (presuming such limitations do not injure the public i.e. patients) and serve a legitimate business purpose of the former employer.  Again, the analysis is fact-specific.

There are certain circumstances in which a New York Court is more likely to deem a non-competition provision enforceable.  For example, if an employee accepts post-termination benefits from the employer (i.e. severance) in exchange for agreeing to abide by the non-compete, the Court is more likely to determine that the restrictive covenant is enforceable.  In such circumstances, the Court may even uphold the non-compete if it is otherwise unreasonable.  It is important to note, however, that some New York Courts have ruled that a non-competition agreement may not be enforced against an employee who is terminated without cause.  In such circumstances, courts have ruled that if the employer did not have a continued willingness to employ the individual, it cannot restrict the employee from finding employment elsewhere.

If you are an employee subject to a restrictive covenant or an employer who is seeking to enforce a restrictive covenant against an employee or former employee, contact Joseph Maya, Managing Partner at Murphy, P.C. at (203) 221-3100 or directly via email atJMaya@Mayalaw.com for a complimentary consultation to discuss your case.

Receiving Both Unemployment Benefits and Severance in Connecticut

Can I receive unemployment benefits in Connecticut if I am receiving severance from my last job?

Losing a job is a difficult time in any person’s life. In the immediate aftermath, you are left to deal with all the questions about how and where to proceed in navigating the job market. Amid that confusion, employers will also sometimes offer severance packages and request the employee to sign documents upon their discharge. The decisions you make during this time can have a profound effect on your legal rights moving forward.

When you are involuntarily terminated from your employment through no fault of your own, your employer should provide you with Form UC-61 from the State of Connecticut Department of Labor. You should use the information contained on the document to accurately respond to the questions contained in the online application for unemployment benefits. It is important that you file your initial claim for unemployment benefits as soon as possible. Unemployment benefit payments are generally not made retroactively. You will need to file an initial claim and then weekly claims to certify that you continue to be unemployed, report job search activities, and confirm that you are ready, willing and able to work, among other things.

In your initial claim for unemployment benefits, there will be a question concerning the gross amount of the severance payment and how many hours or days the payment represents. Section M. of the UC-61 will contain this information. Normally, an applicant’s unemployment benefits will be reduced by the severance payments. The severance payments are allocated to the weeks following the separation of employment.

The next question, however, asks whether any or all of the severance payment was conditional upon signing a separation agreement waiving your right to file a lawsuit against the employer. If the answer is yes, you will need to supply the Department of Labor with a copy of the separation agreement.

Pursuant to Connecticut General Statutes Section 31-236(a)(4), an individual is ineligible for benefits for the weeks he or she receives severance “unless the employee was required to waive or forfeit a right of claim independently established by statute or common law against the employer as a condition of receiving the payment.” Accordingly, if the severance payments are contingent on an agreement not to sue the employer, your unemployment benefit should not be reduced. If you were required to waive a common law or statutory right to receive the severance payment, it will not be deducted from your weekly benefit payment. If you did not waive such rights, then it will be deducted from your weekly benefit payment.

For instance, if the separation agreement you signed contains language such as, “in order to be eligible to receive the payments and any other benefits described herein, you are required to agree to the terms contained in this letter, including the General Release, indicate your agreement by signing and returning this letter,” you may still qualify for unemployment benefits.

To protect your claim, it is imperative that you supply the Department of Labor with your initial claim for unemployment benefits and the signed separation agreement as early as practicable.

If you have been recently terminated through no fault of your own and have questions about your eligibility for unemployment benefits in Connecticut or if you need assistance in negotiating a severance agreement, please call Attorney Joseph Maya at (203) 221-3100 or email at JMaya@mayalaw.com.

Employee Discipline

While there are federal laws in place, employment and labor laws are highly specific to the state in which one is employed. Both Connecticut and New York have very specific rules and guidelines offering certain protections to employers and employees. Whether you are an employee seeking to challenge disciplinary action or termination, or an employer defending such actions, it is important to seek guidance from a lawyer with experience in this particular area of the law. At Maya Murphy, we have attorneys with extensive backgrounds in New York and Connecticut labor law, including issues related to employee discipline.

“At Will” Employment States

Both New York and Connecticut are “at will” employment states. This means that an employee can be fired with little or no explanation in most cases. However, you may have more rights as an employee if you have signed an employment contract. Often, these contracts contain clauses that protect employees from being fired without cause, allowing them to challenge their employer’s actions or seek other legal recourse. An experienced employment lawyer from Maya Law who is familiar with the laws in your state will be able to help you review your employment contract and determine what your rights are in your specific situation.

Exceptions to “At Will” Employment

In addition to contract employees, other individuals may also be exempt from the rules applied to “at will” employees. Some examples of employees who have different protections include:

  • Government workers
  • Employees who are disciplined or terminated based on sex, race, or other discriminatory grounds
  • At-will employees suffering from harassment

The employment lawyers at Maya Murphy have extensive experience both in negotiating employment contracts and litigating unfair discipline or termination cases. With offices and attorneys in both New York and Connecticut, we are able to represent clients in both states with the high level of knowledge and strong client relationships you need from your attorney. Our firm is dedicated to providing the advantages of a large firm with the close, personal attention of a smaller one.

If you need an employment lawyer with experience in employee discipline cases, contact us anytime. Our clients can be found throughout both New York and Connecticut, including Weston, Redding, Wilton, and White Plains.

Relief For a Breach of a Non-Compete

When a party commences an action against another, it can request from the court two types of relief: legal and equitable. Legal relief typically manifests itself in the form of damages, a judgment that uses money to try to right the wrong. Equitable relief usually involves an order from the court instructing a party to perform or refrain from performing a specified activity. In cases of restrictive covenants, the employer will typically request a court order (equitable relief) seeking to enforce the provisions of the agreement and order the former employee to cease engaging in activities that violate the agreement. In cases involving alleged breach of a non-compete agreement, equitable relief is the preferred and most common form of relief because the plaintiff employer claims that it has experienced irreparable harm that cannot be measured in monetary terms. In addition, equitable relief enjoins the other party from further violations of the agreement. Thus, the court order addresses both past and possible future breaches.

Equitable relief is the standard for non-compete agreement cases, but Connecticut courts have, on rare occasion, awarded money damages to plaintiffs as a supplement to equitable relief. For example, in National Truck Emergency Road Service, Inc. v. Peloquin, the court ordered a former employee to return documents that were used in illegal competition, and then awarded damages to the employer for losses directly connected to breach of the non-compete agreement.

In a different case the court awarded only damages, since equitable relief was not a viable option because the non-compete agreement expired by the time the plaintiff commenced the litigation. The court held that the “plaintiff’s request for injunctive relief [had] become moot” due to the expiration, but it allowed the plaintiff to proceed with the action for money damages. The enforcing party was permitted to introduce evidence and facts that enabled the court to calculate the lost profits directly associated with the breach of the non-compete agreement. The court ultimately concluded that the plaintiff was “entitled to recover damages from the defendant in that amount as to the proven breach of the covenant not to compete.” The court, unable to grant injunctive relief, awarded damages for the breach of a restrictive covenant to compensate for the loss suffered by the enforcing party.

VIII. MODIFICATION AND “BLUE LINING”

Under Connecticut law, in cases involving an alleged breach of a non-compete agreement, it may be possible to modify the terms of the contract so as to make an otherwise unenforceable agreement reasonable and enforceable. This results when the parties specifically state in the contract that the court has the express authority to alter its terms in order to enforce it. As another possibility, the court can apply the “blue pencil doctrine,” under which the court,
without the express permission of the parties, amends the terms of the agreement to render them reasonable.

Connecticut recognizes the “blue pencil doctrine” but requires parties to submit evidence from which the court can conduct an informed analysis and establish appropriate geographic and/or time boundaries. If the parties are open to court modification of unreasonable terms to facilitate a valid and enforceable agreement, the more straightforward approach is to include contractual language and clauses in the restrictive covenant itself permitting such court action. An example of such a contractual clause is:

In the event that any provision of this Agreement is held, by a court of competent jurisdiction, to be invalid or unenforceable due to the scope, duration, subject matter or any other aspect of such provision, the court making such determination shall have power to modify or reduce the scope, duration, subject matter or other aspect of such provision to make such provision enforceable to the fullest extent permitted by law and the balance of this Agreement shall be unaffected by such validity or unenforceability.

Under this scenario, both parties consent to giving the adjudicating court the express power to modify terms of the restrictive covenant in order to make the contract, as a whole, reasonable and fully enforceable under Connecticut law.

When determining whether to modify a geographical restriction, courts will generally subscribe to and apply either the “blue pencil rule” or the “Massachusetts rule.” These rules are divergent with respect to a court’s ability to modify geographical terms based on whether the area is divisible according to the language of the contract. The “blue pencil doctrine” permits courts to modify geographical restrictions only when the contractual language creates several distinct areas; the “Massachusetts rule” is much more lenient and allows a court to modify the terms “even though the territory is not divisible in the wording of the contract.” Connecticut courts are more receptive to the application of the “blue pencil doctrine” and feel that the “Massachusetts rule” gives the court expansive, broad powers that, when exercised, result in courts crafting new contracts between the parties.

Connecticut follows the “line of authority which states that if the territory specified in the contract is by the phraseology of the contract so described as to be divisible, the contract is separable and may be enforced as to such portions of the territory so described as are reasonable.” One such case where the court applied the “blue pencil rule” was EastCoast Guitar Center, Inc. v. Tedesco, where the court held that the original “geographic area in the agreement [was] too broad and [was] not reasonable or necessary to protect the plaintiff’s business.” The court dissected the contractual language pertaining to the geographical restriction and reduced it to certain enumerated counties (Fairfield, Litchfield, and New Haven) in order to make the agreement reasonable and enforceable.

Modifications to contractual time restrictions can also occur based on a contractual provision or a court’s application of the “blue pencil rule.” Connecticut courts have asserted that they may “reduce the time limitation because of the ‘blue-pencil rule’ which states that under certain circumstances, a court may enforce parts of an agreement and not others.” In the absence of a contractual provision consenting to modifications, parties can demonstrate to the court that they are open to the possibility of the court modifying the restrictions during the litigation process. This provides the court with a certain degree of freedom to assess the current time restriction and reduce its length if the court finds it excessive and unreasonable. Courts can simply reduce the duration of the time restriction, and may instruct the parties to submit arguments regarding a potential extension to the full contractual period of time prior to expiration of the new restriction. In the latter situation, the court will consider the specific facts of the case in determining whether it is necessary to enforce the original provision of the agreement.
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Our employment law firm in Westport Connecticut serves clients with discrimination, non-compete, and general labor law issues from all over the state including the towns of: Bethel, Bridgeport, Brookfield, Danbury, Darien, Easton, Fairfield, Greenwich, Monroe, New Canaan, New Fairfield, Newton, Norwalk, Redding, Ridgefield, Shelton, Sherman, Stamford, Stratford, Trumbull, Weston, Westport, and Wilton. We have the best employment and labor law attorneys in CT on staff that can help with your Connecticut or New York education issues today.

If you have any questions or would like to speak to an employment and labor law attorney about a pressing matter, please don’t hesitate to call our office at (203) 221-3100. We offer free consultations to all new clients.

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