In a blow to New York employers who wish to enforce restrictive covenants under other state law, the New York Court of Appeals recently held that the Florida choice of law provision in an employment agreement was unenforceable. Brown & Brown, Inc. v. Johnson, No. CA 13-00340, 2015 WL 3616181 (N.Y. Ct. App., June 11, 2015). The differences between the requirements for restrictive covenants under New York and Florida law proved to be too great, and the Court held that applying Florida law would be against the public policy of New York State.
The employment agreement at issue in Brown & Brown provided that all disputes would be governed by Florida law. The Court of Appeals then analyzed the differences between Florida and New York law and found several specific disparities. The Court first noted that New York law requires that restraints under restrictive covenant be reasonable under a three prong test. A restraint must: (1) be no greater than required for the protection of the legitimate interest of the employer; (2) not impose undue hardship on the employee; and (3) must not be injurious to the public. Once shown to be reasonable under each of the 3 prongs, the burden shifts to the employee to show that the restraint is overbroad and unnecessary.
Florida law, on the other hand, only requires an employer to show that a restraint is necessary to protect a legitimate business interest before the burden shifts. Moreover, Florida law expressly prohibits courts from considering the harm or hardship to the former employee from a restraint. Additionally, courts in Florida are required to construe restrictive covenants in favor of protecting the employer’s interests and are not allowed to use any rules of contract interpretation that would require the construction of a restrictive covenant narrowly, against the restraint, or against the drafter.
The Court reasoned that these differences in Florida’s law constituted a “nearly exclusive focus on the employer’s interests, [a] prohibition against narrowly construing restrictive covenants, and [a] refusal to consider the harm to the employee.” Id. When compared with New York’s requirement that restrictive covenants be “strictly construed” and that courts balance the interest of the employer, employee, and the public, the Court held that application of Florida law in the case would be “offensive to the fundamental public policy of the State.”
In light of Brown & Brown, New York employers should consider not including a Florida choice of law provision in their employment agreements because it will probably not be enforced, at least with regard to restrictive covenants. To the extent New York employers have Florida choice of law provisions in their employment agreements, they should work with employment counsel to structure the terms of any restrictive covenant in accordance with New York law to ensure it will be enforced by New York courts.
