Recently, I was asked by a union member for advice concerning the enforceability of a non-compete agreement he had entered with an employer.
The clause stated:
“During the period of your employment and for a period of five years thereafter, you hereby agree that you will not directly or indirectly engage in competition in any way with the employer by being associated with any business that the employer is already engaged in.”
Many professional musicians — due to the unique nature of the services they perform — are requested to enter into non-compete agreements.
For this reason I have devoted this article to reviewing some basic legal principles concerning the effect and enforcement of these contracts.
Non-compete agreements (or “covenants not to compete”) are often termed restrictive covenants, since their intended effect is to restrict specific services that an employee can perform outside their employment relationship.
Generally, speaking, restrictive covenants are disfavored by the courts.
Nonetheless, these clauses have usually been held to be binding upon employees who agree to them if they satisfy several conditions.
Restrictive covenants will be enforceable only if they are:
- Reasonable in time and area;
- Necessary to protect the employer’s legitimate interests;
- Not harmful to the general public;
- Not unreasonably burdensome to the employee.
(See Reed, Roberts Associates, Inc. v. Strauman, 40 N.Y.2d 303 .)
The legal standard is whether or not the restrictions agreed to are justifiable and reasonable.
Hence, if the employee’s services are special and unique, then an employer would be considered justified in restricting the employee from performing services elsewhere for a period of time.
Courts have held that musicians’ services are sufficiently unique to provide justification for an employer to require the performer to enter a covenant not to compete as a condition of employment. Ticor Title Insurance Co., v. Cohen, 173 F. 3d 63 (2nd Cir. 1999).
Furthermore, the names of musical groups, such as “The Glenn Miller Orchestra,” are specific enough to permit prohibition on the band leader from using the name in association with other groups. Glenn Miller Productions v. DeRosa, 167 A.D. 2d 281 (1st Dept. 1990).
However, non-compete contracts that are not limited in terms of duration and geographical scope will be deemed unenforceable as an improper restraint of trade. Heartland Securities Corporation v. Gerstenblatt, 2000 WL 303274 (SDNY 2000).
The covenant detailed at the beginning of this article would pass muster, since it was limited in scope and concerned a professional whose services were considered to be unique.
Unfortunately, I had to advise the musician that he had to live with the deal.
There is a lesson to be learned from this example.
Musicians must proceed cautiously before they enter into any personal services contract.
If the agreement they sign contains a restrictive covenant, then they could be living with the consequences of their decision for years to come without remedy.
Harvey Mars is one of Local 802’s lawyers. Legal questions are welcome from 802 members. E-mail them to firstname.lastname@example.org. Nothing in this article should be construed as formal legal advice given in the context of an attorney-client relationship.