Every once in a while, there is some good (i.e. pro-employee) news on the non-compete front. Such is the case this week with a recent decision out of the Southern District of New York. A federal court has just reaffirmed the long-standing rule that under New York state law, an employee who is terminated without cause is not bound by his non-compete agreement. The case is Arakelian v. Omnicare.
In Arakelian, the plaintiff was fired from her position at Omnicare without cause. She sought (and won) a declaratory judgment holding that the non-compete and non-solicitation agreement she had signed was unenforceable.
The rationale behind the New York rule is a very basic and reasonable one. In entering a non-compete agreement, an employee is essentially exchanging mutual covenants. The employee, in exchange for the benefit of the employment opportunity, agrees not to work for a competitor for a certain amount of time after leaving the company. Where an employee is terminated without cause, and deprived of the benefit of that bargain, it is inequitable to hold that employee to the terms of the agreement.
Well done, New York. Well done.
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