The Fourth Department of New York’s Appellate Division recently issued a decision that included a ruling on the enforceability of restrictive covenants in employment agreements, as one of several issues addressed on appeal. In Hernandez Technology, Inc. v. Rivera, 239 AD3d 1354, while primarily addressing other issues, including defamation and the No Wage Theft Loophole Act, the Fourth Department affirmed the motion court’s determination that an employment contract’s  non-interference and non-solicitation provisions were enforceable as a matter of law. Notably, the Court held that these restrictions were enforceable as a matter of law despite the existence of an unenforceable non-competition provision in the same agreement.  The Fourth Department affirmed the motion court’s decision to partially enforce the employment agreement’s restrictions on interference with existing contracts and relationships and solicitation of customers and employees. 

Below, the former employee argued that the invalidity of the non-competition restriction invalidated the entire agreement. The motion court disagreed and proceeded to partially enforce the non-interference and non-solicitation provisions, limited to “those customers developed by defendant while employed by the plaintiff.”  The motion court modified the restrictions to comply with binding precedent, including BDO Seidman v. Hirshberg, 93 NY2d 382 (1993) That is, the motion court permitted blue penciling of the non-interference and non-solicitation provisions, which it implicitly found to be overbroad, notwithstanding the existence of the invalid non-competition provisions. 

Interestingly, the employment agreement in Hernandez Technology also had a “savings” clause which expressly permitted a court to modify the restrictions to the extent necessary to enforce the agreement. Previously, the Fourth Department has considered the existence of such clauses to be evidence employer overreach, which severely undermine the likelihood of partial enforcement. It is not clear whether the savings clause was considered by the motion court or the Fourth Department. 

Only time will tell whether the Fourth Department’s decision in Hernandez Technology provides meaningful assistance for employers seeking to partially enforce restrictive covenants, or whether the ruling will be limited to its facts because of its brief discussion and the Fourth Department’s clear focus on other issues.  

Steven E. Cole is managing partner with Adams Leclair LLP.  Steve can be reached at SCole@adamsleclair.law.