Originally published in the New York Law Journal
BY NEAL H. KLAUSNER
AND DAVID FISHER
In recent years, New York courts repeatedly have held that post-employment restrictive covenants (including non-competition and non-solicitation-of-customers provisions) are per se unenforceable when the employer seeking to enforce the covenants has discharged the employee without cause. In doing so, these courts relied on Post v. Merrill Lynch, Pierce, Fenner & Smith,1 a case in which the New York Court of Appeals held that when an employee is terminated without cause, and thereafter enters into competition with his or her former employer, it would be unreasonable as a matter of law to enforce an agreement providing that the employee forfeit previously earned pension benefits based on such competition. But the Second Circuit’s recent decision in Hyde v. KLS Prof’l Advisors Grp.,2 suggests that the lower courts have extended the ruling in Post beyond its intended limitation to the forfeiture-of-benefits-for-competition context, and may indicate an end to the automatic rule that restrictive covenants are unenforceable when an employment relationship is terminated without cause. More…
