In the recent case of L&M Pilates Brooklyn Mgmt, LLC v. Milla Lerner, the New York Supreme Court reaffirmed the importance of including specific time restrictions in non-compete agreements. Without them, your attempts to protect your business interests could be thwarted as the agreement will be deemed unenforceable.
Guidance from the Case
An independent pilates instructor violated her contract by opening a competing studio in the same area while still under contract. Despite a non-compete and non-solicitation clause in the contract, there was a dispute over the time limitation. The employer argued that a one-year restriction applied to both elements, but the contract’s wording explicitly limited the one-year term to the non-solicitation only.
The court’s decision highlights key points for employers:
- Non-competes must be time-bound: Non-compete provisions without clear time limits will be considered unenforceable.
- Ambiguity hurts enforceability: The court will not attempt to revise an agreement’s missing terms. In this case, even though the employer acknowledged the lack of a time limit earlier in a cease-and-desist letter, it couldn’t be fixed at the time of the lawsuit.
- Protecting customer relationships: While the non-compete failed, the court upheld the validity of the non-solicitation clause. This recognizes that employers have a legitimate interest in protecting client relationships developed through employee interactions.
Key Takeaways for Employers
- Clearly define time limits: When drafting or reviewing non-compete agreements, explicitly state the time restriction for the non-compete clause.
- Seek legal guidance: Consult with an attorney to ensure your non-compete agreements are well-crafted and legally valid in your jurisdiction. AI will not save you and your business in court.
- Reasonableness matters: Even with time limits, restrictions must be reasonable in scope, duration, and geographic area to be enforceable.
- Focus on non-solicitation: A well-defined non-solicitation clause can safeguard customer relationships, potentially having a better chance of enforcement than a broad non-compete.
Protecting Your Business
Non-compete agreements, when used strategically, protect crucial business interests. However, without careful attention to their terms, including time limitations, they can fail their intended purpose. Review your existing agreements and consult with an employment lawyer for the best protection tailored to your specific needs.
Read the decision here.
