Court Invalidates Non-Competition Covenant

The court’s decision in Eyes of the World, Inc. v. Boci illustrates yet again the difficulties faced by a party who attempts to enforce a restrictive employment covenant, which are disfavored if too broad.

Defendant Boci was an employee of plaintiff Eyes of the World, a provider of hair-removal services, until she quit and went to work for NYC Waxing, LLC.  Plaintiff sought to enforce Boci’s restrictive covenant and an award of damages.  The court refused to enforce the covenant and dismissed the action.

The covenant provided that “[f]or a period of one (1) year following termination of [Boci’s] employment for any reason, [Boci] agree[s] not to provide Salon Services in New York City to any client of Eyes of the World, Inc. or Shobha, Inc. for whom [Boci] provided services during the last twelve (12) months of [Boci’s] employment with Eyes of the World, Inc.”

Plaintiffs alleged that Boci performed services on former Shobha clients at her new place of employment and indeed performed services for eighty six (86) former plaintiffs’ clients at her new employer within one (1) year of her termination.

The law:

“In order to be enforceable, an anticompetitive covenant ancillary to an employment agreement must be reasonable in time and area, necessary to protect the employer’s legitimate interests, not harmful to the public, and not unreasonably burdensome to the employee[.]  …  Restrictive covenants are generally frowned upon by courts due to public policy considerations that seek to prevent restrictions on a person’s livelihood[.] …

Consequently these covenants[] will be enforced only if reasonably limited temporally and geographically and then only to the extent necessary to protect the employer from unfair competition which stems from the employee’s use or disclosure of trade secrets or confidential customer lists, or if the employee’s services are unique or extraordinary[.]

(Emphasis added.)  Here, the court rejected plaintiffs’ attempt to show that Boci’s services were “unique and extraordinary”, as there was no evidence that Boci had access to trade secrets, client lists, or proprietary information.  In addition, the covenant was “unreasonable in its limitation, burdensome …, and not necessary to protect the employer’s legitimate interests.”

The court cited approvingly an Appellate Division, First Department decision (Investor Access Corp. v. Doremus & Co., Inc., 186 AD2d 401) not to enforce a similar one-year covenant preventing a public relations account executive from “soliciting or servicing any current or former client of the plaintiff employer”.  The Investor Access court refused to enforce the covenant, since the employee did not provide unique or extraordinary services or misappropriate trade secrets or confidential information, and the employer’s clients’ decisions to follow the employee “were based upon the clients’ needs and the employee’s outstanding ability in the field”.

Similarly, Boci’s skills were not unique or extraordinary, and it appeared that clients “opted to follow Boci based on their needs and her ability.”  Thus, the court struck down the restrictive covenant in plaintiff’s employment agreement as overly broad and unreasonable.