The New York Court of Appeals recently declined to uphold a Florida choice of law provision in an employment agreement on the grounds that it violated New York public policy. The case, Brown & Brown, Inc. v. Johnson, 25 N.Y.3d 364 (2015), serves as a wake-up call to employers seeking to enforce both noncompetition and nonsolicitation agreements against out-of-state employees.
The plaintiffs in Johnson, a Florida-based corporation and its New York subsidiary, sought to enforce a nonsolicitation clause in an employment agreement against a New York employee of the subsidiary who began working for a competitor after plaintiffs terminated her employment. The employment agreement included a choice of law provision that designated Florida law as the governing law.
As a general rule, parties are free to reach agreements regarding contract terms, including choice of law; courts will strike down such provisions only where the foreign law is "truly obnoxious" to New York public policy. The Court found that the defendant met this heavy burden, emphasizing the dichotomy between Florida law governing enforcement of a restrictive covenant, which places a "nearly exclusive focus on the employer's interest," and New York law, which requires courts to balance an employer's interests against the hardship and impact enforcement would have on an employee's livelihood. As a result, the nonsolicitation covenant was found to be overbroad.
In the wake of Johnson, employers are encouraged to re-evaluate choice of law provisions in their employment agreements for New York employees in instances where the governing law is significantly different from New York's and to consider revising these provisions. The case also reminds employers of the importance of coordinating choice-of-law and forum selection clauses. Employers who choose not to do so run the risk of exposing their employment agreements to greater scrutiny by an out-of-state court in the event a noncompetition or nonsolicitation provision is challenged.
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