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By Christine Malafi

Summer may be over, but if your office is like mine, interns are a welcome presence year-round. Hiring interns can be a mutually beneficial experience for both the employer and the intern. Interns develop hands-on experience in a field they are interested in pursuing, and a company gets a fresh take on things from the minds of a younger generation. As you get ready to welcome another round of interns this fall, make sure you understand how to pay them.

Before bringing interns on board, companies must determine whether the New York State minimum wage and overtime rules apply to their interns. In general, an intern is exempt from the New York State Minimum Wage Act and Orders (meaning, the intern does not need to be paid minimum wage, if anything) only if the intern and the business are not in an employment relationship. Note, you and your intern are in an employment relationship unless all eleven of the following criteria apply. (This test applies only to the state Minimum Wage Act and Orders, not unemployment insurance or workers’ compensation.)

1. The training you provide to your intern is close to the training an educational program would provide (for example, the intern’s school oversees the program and provides school credit).
2. The training your business provides primarily benefits the intern.
3. The intern works under close supervision and does not displace regular employees.
4. Your intern’s activities do not immediately or solely provide an advantage to you or your business.
5. The interns are not necessarily entitled to a job after the internship ends and are free to take jobs elsewhere.
6. The interns are notified in writing that they will not receive wages and are not considered employees for minimum wage purposes.
7. Training must be directly supervised by individuals who are knowledgeable and experienced in that field.
8. Interns do not receive employment benefits (health, dental, pension, retirement, etc.).
9. The training you provide is not tailor-made for your business; it is more general and can be used in similar businesses.
10. The screening process for interns is not the same process your company uses when hiring full-time employees.
11. Ads or posts for the training program discuss education and hands-on experience rather than employment opportunities. However, you can state that your company is interested in hiring an intern for full-time employment once full training is completed.

Do all the above criteria describe the relationship with your intern? If not, the intern must be paid pursuant to the state minimum wage and overtime laws. Please contact us with any questions or to discuss your unique situation. Here’s to a productive experience for both of you!

Check out our blog to view the 2020 minimum wage requirements. For more on our labor services, visit our Labor and Employment page.

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.