Non-Compete/Non-Solicitation Provisions Upheld, but Weakened

​The Appellate Division recently ruled on Restrictive Covenant Agreements ("RCAs"). These agreements are also known as non-competes or non-solicitation agreements. The first step in any of these types of cases is for the business to prove that it has a legitimate business interest in having a restrictive covenant with its employee or ex-employee. In ADP v. Kusins, et. al., the business cleared the first hurdle.   In the business' RCA, it prevented ex-employees, "from soliciting any actual or prospective … client, regardless of the employee's geographical location or personal contact with the client, for a twelve-month period after termination." The Court here found these restrictions were too broad.  However, the court did not void the entire RCZ, but instead curtailed the terms of the restrictions.
 
First, the court allowed ex-employees to be prohibited from soliciting any "actual clients" whom they had prior contact with while at the former business.  Second, the court only permitted restricting solicitation of prospective clients, "if the employee gained knowledge of the potential client while at ADP and directly or indirectly, solicits that client after leaving."  Third, with regard to the non-competition portion of the RCA, the Court found a business could, "restrict its former employees, for a reasonable time, from providing services to a competing business in the same geographical territory in which the employee operated while at ADP." The Court did not define what a "reasonable time" meant but in the particular RCA before the court, the length of the restriction was 12 months.  (ADP v. Kusins, et. al.)