Among the most important aspects of an employee agreement is the inclusion of restrictive covenant provisions that protect an agency, brokerage and, at times, producer’s confidential information. New York courts do not favor restrictive covenants that impinge upon an employee’s ability to engage in his or her livelihood. Any such restrictions must be reasonable and fairly connected to a legitimate and protectable interest of the employer. In any event, the agency or brokerage as the employer certainly has the right to have all employees enter into an agreement restricting any confidential or proprietary information concerning its business. Customer lists may or may not qualify as proprietary information depending upon the circumstances. Further, although trade secrets comprise protectable business interests of the employer, it is not easy to qualify information to meet the legal definition of a “trade secret.”

Questions arise in situations when an employee has been working at an agency/brokerage with no written agreement in effect and the agency/brokerages then desires to institute written agreements with its employees. Questions also come up when an employee is operating under the terms of an agreement, but the agency/brokerage desires to change its substantive content. The ultimate enforceability of a new agreement or an amended agreement an agency or brokerage wants its employees to execute rests upon the question of degree and context. For example, suppose the employee is a producer who is about to transfer his or her business to the agency or brokerage when he or she commences their employment. Later, the agency/brokerage realizes the agreement it entered into needs to be modified and informs the producer that a new agreement is now required. Depending upon the nature of the modifications, a court may view the situation as unfair to the employee as a form of “bait and switch” after the agency or brokerage has procured the producer’s business with the producer relying on the terms of the original agreement. The court could take the position that the employee was presented with the difficult choice of signing the amended agreement or being severely and adversely affected by refusing to enter into the modified agreement.

The overriding concern of New York courts in considering employment agreements is fairness and reasonableness. This position does not mean an agreement favoring the employer is automatically problematic if there is a legal dispute between the parties based on the agreement. Courts will refuse to enforce the strict terms of such contracts only when they are so overreaching or one-sided that it would be unfair to enforce its contents. Again, the particular circumstances will vary in each instance and be evaluated on a case-by-case basis.

Finally, it is always advisable for any employee presented with an employment contract to have it reviewed by his or her own attorney. This is equally important whether the employee is a producer, CSR or any another employee of the agency or brokerage. By doing so, the employee will help ensure that his or her interests related to their employment arrangement are adequately protected. Always keep in mind that the court’s main focus when examining producer and employee agreements is whether they are reasonable on the limitation of time and size of the area the employee/producer is unable to compete in after their employment with the agency or brokerage ends.

Submitted by
Jan A. Marcus​, Esq.
Keidel, Weldon & Cunningham, LLP