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A standard provision typically included in non-compete agreements is a “partial enforceability” provision that gives the Court the power to modify or “blue pencil” the terms of the agreement if the Court finds the restrictive covenant to be overly broad. For example, if a Court finds that a non-compete provision restricting an employee from working for a competitor anywhere within 100 miles of its former employer is too broad and not necessary to protect the former employer’s business interests, the partial enforceability provision would permit the Court to limit the geographic restriction to say, 10 miles, if the Court deems that narrowed limitation suitable. However, just because a partial enforceability provision is included in a non-compete agreement does not mean a Court will modify the terms to “fix” an otherwise unenforceable agreement and, many times, the Court will simply decline to enforce the agreement in its entirety.

One recent example of this came out of the Appellate Division, Second Department in Long Island Minimally Invasive Surgery, P.C. v. St. John’s Episcopal Hospital, 2018 NY Slip Op 05674 (2d Dep’t 2018) which affirmed the earlier decision of Justice Driscoll in Nassau County Supreme Court. Plaintiff was a medical practice that performed weight loss and other general surgeries. It had seven different offices throughout the New York metropolitan area. Defendant Javier Andrade was a surgeon hired by Plaintiff. Upon being hired, Andrade signed an employment agreement with a restrictive covenant prohibiting him, for two years upon the expiration of his employment, from performing any type of surgery within 10 miles of any of Plaintiff’s seven offices and affiliated hospitals. During his employment with Plaintiff, Andrade worked at only two of Plaintiff’s Nassau County offices and a hospital in Nassau County. When Andrade left Plaintiff, he went to work for Defendant St. John’s Episcopal Hospital.

Although Andrade worked for St. John’s in an area that was outside of the restricted area, St. John’s itself fell within the restricted area. As a result, Plaintiff commenced the action for breach of the restrictive covenant.

Prior to any discovery, both Andrade and St. John’s moved for summary judgment to dismiss the Complaint and their motion was granted. Plaintiff appealed. On appeal, the Appellate Division held that the lower court correctly determined that the geographical restriction was overly broad and geographically unreasonable “because it effectively barred [Andrade] for performing surgery, his chosen field of medicine, in the New York metropolitan area” and Plaintiff had failed to show why such a restriction was necessary to protect its interests especially because the restriction included areas where Andrade never even worked when he was employed by Plaintiff.

Importantly, the Appellate Division also agreed with the lower Court’s refusal to modify the restrictive covenant to make it enforceable. Citing prior decisions in Scott, Stackrow & Co., C.P.A.’s, P.C. v. Skavina, 9 A.D.3d 805 (3d Dep’t 2004) and BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999), the Court noted, “The determination of whether an overly broad restrictive covenant should be enforced to the extent necessary to protect an employer’s legitimate interest involves ‘a case specific analysis, focusing on the conduct of the employer in imposing the terms of the agreement.’

Partial enforcement may be justified if an employer demonstrates, in addition to having a legitimate business interest, ‘an absence of overreaching, coercive use of dominant bargaining power, or other anti-competitive misconduct.’ ‘Factors weighing against partial enforcement are the imposition of the covenant in connection with hiring or continued employment—as opposed to, for example, imposition in connection with a promotion to a position of responsibility and trust—the existence of coercion or a general plan of the employer to forestall competition, and the employer’s knowledge that the covenant was overly broad.’”

In this case, the Appellate Division agreed that partial enforcement was not warranted because Plaintiff failed to show that there was good faith on its part, that there was no overreaching in having Andrade agree to the restrictive covenant which was a prerequisite to being hired, and there was also evidence from the record that Plaintiff refused to negotiate the non-compete language.

What is becoming clear from recent Court decisions on restrictive covenants, including this one, is that how and under what circumstances employers implement restrictive covenants on their employees is as important as the language contained within the restrictive covenants themselves.

By Patrick McCormick and Richard DeMaio

What do a baker and the President of the United States have in common? After reading two of the most highly anticipated opinions of the October 2017 term, Masterpiece Cakeshop v. Colorado Civil Rights Commission and Trump v. Hawaii, some might say the ability to restrict access based on religion. In these opinions, the Court grappled with sensitive issues balancing First Amendment religious freedoms against the public interest. Both opinions analyzed whether laws were neutral toward religion in light of public officials’ statements evidencing religious animus. Weeks after finding that expressions of hostility to religion by state officials during an administrative hearing toward a baker who declined to serve a same-sex couple violated the baker’s freedom of religion, the Court deemed anti-Muslim statements made by President Trump and his advisors as irrelevant to claims of religious discrimination.

In Masterpiece, the Court weighed in on when a public accommodation law must yield to a business owner’s First Amendment rights. As is common in many states, Colorado law bans discrimination based on sexual orientation by businesses serving the public. Despite this law, Jack Phillips, a conservative Christian baker, refused to make a wedding cake for a same-sex couple because he said doing so would violate his sincerely held religious beliefs. A Colorado civil rights agency ruled that the baker violated the state’s public accommodation law. If the baker wanted to bake cakes for opposite-sex weddings, he would have to do the same for same-sex weddings. A Colorado Court upheld the ruling. The baker appealed to the Supreme Court.

The Supreme Court narrowly ruled in favor of the baker, 5-4. The opinion hinged on statements made by commissioners of the Colorado agency. The “neutral and respectful consideration to which Phillips was entitled was compromised” by statements made by commissioners of the Colorado Civil Rights Commission. Masterpiece Cakeshop, Ltd. v. Colorado Civil Rights Comm’n, 138 S. Ct. 1719, 1729 (2018). During hearings, commissioners “went so far as to compare Phillips’ invocation of his sincerely held religious beliefs to defenses of slavery and the Holocaust” and “endorsed the view that religious beliefs cannot legitimately be carried into the public sphere or commercial domain, implying that religious beliefs and persons are less than fully welcome in Colorado’s business community.” Id. The opinion focused so heavily on the religious animus displayed during the hearings that the Court did not even rule on the main issue in the case—whether the Colorado law compelled the baker to endorse a message that violated his sincerely held religious beliefs. Instead, the opinion left open the possibility that a business owner’s religious beliefs might have to yield a state’s public accommodation law in a future case.

The opinion noted that while “the religious and philosophical objections to gay marriage are protected views and in some instances protected forms of expression,” society has also recognized “gay persons and gay couples cannot be treated as social outcasts or as inferior in dignity and worth.” Id. at 1727. But in this case, where a state commission bears the responsibility of enforcing anti-discrimination laws, such laws must be enforced in a fair and neutral manner not tainted with religious animus. Based on this, the Court held that the Colorado Commission violated the free exercise clause.

Despite religiously charged statements being the death knell in Masterpiece, weeks later in Trump v. Hawaii, the Trump administration’s travel ban survived scrutiny. The travel ban restricted immigration to the United States by citizens of eight countries, most of which are predominantly Muslim. Both during his campaign and throughout his presidency, President Trump and his administration issued numerous statements evidencing religious animus towards Muslims. President Trump issued a formal statement “calling for a total and complete shutdown of Muslims entering the United States.” Trump v. Hawaii, 138 S. Ct. 2392, 2417 (2018) (Sotomayor, J., dissenting). This statement was maintained on his website until May 2017, several months into his presidency. President Trump also asserted that “[w]e’re having problems with the Muslims, and we’re having problems with Muslims coming into the country.”  Id.

Unlike in Masterpiece, the majority in Trump disregarded the Trump administration’s repeated anti-Muslim statements and instead relied on national security justifications to uphold the travel ban. The majority noted that ordinarily it would only consider whether the travel ban is neutral on its face. However, even looking beyond the text of the travel ban and the Trump administration’s inflammatory statements, the Court held that the ban still survives because it is based on a legitimate purpose: “preventing entry of nationals who cannot be adequately vetted and inducing other nations to improve their practices.” Id. at 2421.

Justice Sotomayor lamented the seemingly contradictory holdings of Masterpiece and Trump in her trenchant dissent in Trump. Justice Sotomayor cited Masterpiece, questioning how the Court could find that just weeks earlier state commissioners’ statements regarding religion were persuasive in finding a violation of the First Amendment, but in Trump the majority completely disregarded the administration’s anti-Muslim statements. Justice Sotomayor complained that the majority “blindly accept[ed] the government’s misguided invitation to sanction a discriminatory policy motivated by animosity toward a disfavored group, all in the name of a superficial claim of national security.” Id. at 2448.

It is difficult to reconcile how the Court came to such divergent conclusions finding that public officials’ statements were relevant in Masterpiece, but irrelevant in Trump. It is true that both cases involved allegations of religious animus based on officials’ statements. However, the cases involved completely different claims and circumstances. Masterpiece concerned the free exercise clause, while Trump concerned the establishment clause. This point is critical because each claim invokes different levels of scrutiny. The free exercise clause can trigger strict scrutiny for per se violations. Had the free exercise clause been raised on appeal in Trump, perhaps there would be a different outcome. The anti-Muslim statements may have been deemed per se violations, triggering strict scrutiny when determining whether the government’s national security justification was genuine. However, Trump was merely an establishment clause case affording the government a much more deferential level of scrutiny. Moreover, the statements in both cases arose under different circumstances: in Masterpiece, an adjudicatory hearing to enforce an anti-discrimination law, and in Trump, pre- and post-presidential campaign statements about foreign affairs. In Masterpiece, the statements of the commissioners were intertwined with the application of the Colorado law. On the contrary, in Trump, while the administration’s statements were distasteful, they did not affect the application of the travel ban. On its face, the ban is neutral toward religion and justified by national security interests, which is all that is needed to pass muster under an establishment clause test.

The government bears the constitutional duty to make and enforce laws in a manner neutral toward religion. The government should never compel an individual to endorse a specific message just because the individual has a sincerely held belief contrary to the government.  Likewise, the government should never treat individuals unjustly regardless of whether they follow Christ, Allah, someone else, or no one at all. Considering the divisiveness of the current social and political landscape there will surely be protégés to Masterpiece and Trump. There will be another business owner who rejects a customer based on sincerely held religious beliefs, and the travel ban will continue to be argued over in the court of public opinion along with the administration’s family separation policy, and who knows what the Court will decide then. For now, it is certain that the same-sex couple in Masterpiece did not get their cake, but President Trump got his travel ban.