The New York Appellate Division, Fourth Department, recently held in Brown & Brown v. Johnson, 1109 CA 13-00340 (February 6, 2014) that a Florida choice-of-law provision in an employment agreement among a Florida corporation, its New York subsidiary and a New York based and resident employee containing restrictive covenants is unenforceable because it is “truly obnoxious” to New York public policy.

Defendant Theresa A. Johnson was hired by plaintiffs, insurance intermediaries, in December 2006 to provide actuarial analysis for plaintiffs. On her first day of work, Johnson was presented with a number of documents to sign, including an Employment Agreement, which contained the three covenants at issue: a non-solicitation covenant, prohibiting solicitation or servicing any client of plaintiffs’ New York offices for two years after termination of Johnson’s employment; a confidentiality covenant, prohibiting disclosure or use of plaintiffs’ confidential information; and a non-inducement covenant, prohibiting Johnson from inducing plaintiffs’ New York employees to leave plaintiffs’ employment for two years after termination of Johnson’s employment. The Agreement also stated that it would be governed by and construed and enforced according to Florida law.

Florida has perhaps the most comprehensive and detailed state statutes concerning restrictive covenants and enforceability. In conducting its analysis in order to vitiate Johnson’s non-solicit of customers restriction, the Court honed in on two specific areas that differ markedly from New York common-law, despite the fact that there are many more harmonious provisions and seemingly similar policy considerations. Since the Florida statute expressly forbids courts from considering the hardship imposed upon an employee in evaluating the reasonableness of the restrictive covenant (Fla. Stat. § 542.335(1)(g)(1)) and also provides that any such covenant must be construed in favor of providing protection to all legitimate business interests of the party seeking enforcement, it was found to be “truly obnoxious” to the policies articulated in BDO Seidman and its progeny under New York law.

If you are an employer and use Florida law as the controlling law in your agreement for employees located outside of Florida (and particularly for those in New York) you may want to reconsider choice of Florida law in light of the holding in Brown & Brown. The two provisions of the Florida law found “truly obnoxious” pervade almost any restrictive covenant analysis. While the Court could have rested its reasoning on the explicit language in Florida that provides you need not consider any undue hardship on the employee in conducting the enforceability analysis, it went further to provide that since Florida law requires courts to construe restrictive covenants in favor of the party seeking to protect its legitimate business interests (Florida Statutes § 542.335(1)(h)), it was especially obnoxious on that basis as well. The latter conclusion affects any restrictive covenant analysis in New York, not only non-competes but also non-solicits, non-service, non-poach or other more specific and narrow restrictions. While one may not agree with the Court’s analysis or conclusion, anyone trying to enforce in New York (and perhaps any state other than Florida) any restrictive covenant controlled by Florida law will have to reckon with the Brown & Brown holding.

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