Kudos to you, ABC, for bringing this story to light.

And shame on you, Cubist Pharmaceuticals, for your discriminatory narrow-mindedness.

Kara Krill who works for Massachusetts-based Cubist Pharmaceuticals, recently had twin children via a surrogate. She was compelled to have these children through a surrogate because she had health issues that prevented her from having children in the conventional manner.

Naturally, she was overjoyed when she learned that the surrogacy resulted in the anticipated birth of not one – but two children. That is, until the HR department at her employer responded that she would be denied the 13 full weeks of paid maternity leave that was set forth in their written policies, and instead would be granted only a 5 day leave of absence that is traditionally reserved for children that are adopted, or for fathers seeking paternity leave. Moreover, according to Krill, one of her bosses commented that she  should “‘put [her] twins in daycare,’ so she could come back to work sooner.’”

Mrs. Krill has now sued her employer in federal court, claiming that her employer has breached their contract, and their covenant of good faith and fair dealing, and has openly discriminated against her based upon her disability.

I, for one, am rooting for her.

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Although I’ve written extensively on the subject of non-compete agreements, setting forth some of the general principles and the exceptions to those rules that help dictate whether a particular non-compete agreement will or won’t be enforced by a New York court, I must concede that it’s often hard to predict with any degree of certainty what a New York court will do.

That’s why I give kudos to attorney Stephen Kramarsky, Esq., who authored an excellent article on New York non-compete agreements that recently appeared in the New York Law Journal.

The premise of his article is this: critical analysis of the courts’ treatment of non-compete agreements has shown time and again that the question of whether these provisions will be upheld or rejected turns on the unique and specific facts of each case. Further complicating an attorney’s ability to predict the outcome of a challenge to a non-compete agreement, the courts have frequently vacillated on these provisions  – even when the employees’ agreements and positions were essentially the same, and even at the same company.

For example, in International Business Machines Corp. v. Visentin, a Federal Court in New York denied IBM’s request for a preliminary injunction seeking to enforce a non-compete agreement;  But in IBM Corp. v. Papermaster, a case that was decided just over two years ago, the same Federal Court upheld the restrictive covenant, holding that by allowing Visentin to work for Apple would “inevitably” lead to the disclosure of critical proprietary information.

Quite frankly, it is hard to fault IBM for assuming they would win this fight; after all, both Papermaster and Visentin were “key, high-level technical managers, members of IBM’s most important senior management committee with responsibility for some of the company’s most important business initiatives.”

But that underscores the essential point made above: it is very difficult to predict accurately whether a New York court will enforce a non-compete agreement, particularly when you’re dealing with senior-level employees.

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Consider the following hypothetical scenario: Jim is hired by ABC Stores as Executive VP of Sales and Marketing. His 3-year employment contract states that all managers at ABC’s stores are required to coordinate their in-store marketing efforts through him, including securing his approval of all vendors.

Six months later, ABC brings in its CFO’s son Peter into the company, who has just received his MBA. Within one week of Peter starting his job at ABC, Jim notices that 3 of ABC’s 25 store managers failed to forward him their monthly marketing proposals. Two months later, that number increased to 20 out of the 25. And now, he also learns from two of his favored vendors that Peter, whose title is now Senior Vice President, terminated ABC’s agreements with them – all without Jim’s knowledge, and that he circulated a confidential memorandum – which also bore the CEO and CFO’s signatures – directing that all sales and marketing efforts now be run through him, rather than Jim.

In the face of this embarrassment and the stripping of all his essential job duties, Jim feels compelled to resign. But he is concerned: the job market is much worse now than when he signed the contract, and if he quits, won’t he be automatically forfeiting his right to recover under the employment contract?

Fortunately for Jim, under New York law the answer is no. In New York, if an employee is hired to fill a particular position, any material change in (his, her) duties, or a significant reduction in rank may qualify as a breach of the employment contract. On the other hand, and in the interests of full disclosure, resignation is not without risk: although in this particular fact scenario it is unlikely, a jury may ultimately decide that the change in duties that the employee suffered were not in fact “significant,” and defeat the employee’s breach of contract claim.

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As you may be aware, it has become increasingly common for employers to condition their employees’ receipt of post-employment benefits upon the employees’ agreement to abide by a strict non-compete clause.  So here’s the question (which, unfortunately, occurs altogether too frequently): what if the non-compete is unreasonably and unduly restrictive (i.e., prevents you from using your acquired knowledge and expertise to earn a living), and your job has become intolerable to the point you want to quit?

Unfortunately, for purposes of evaluating the enforceability of a non-compete, or non-competition agreement, the difference between voluntarily resigning and being fired is quite important under New York law. This is known in legalese as the “employee choice doctrine.” (For additional information on this topic, please see “When NY Courts Will Uphold Non-Compete Clauses – No Matter How Unreasonable“).

As a tacit exception to New York’s rule that disfavors non-compete agreements, the employee choice doctrine is based on the notion that “if the employee is given the choice of preserving contract rights by refraining from competition or risking forfeiture of such rights by exercising a right to compete, there is no unreasonable restraint upon an employee’s right to earn a living.” Post v Merrill Lynch, Pierce, Fenner & Smith, Inc., 48 NY2d 84, 421 NYS2d 847, 397 NE2d 358.

But there is a way to defeat this exception.

In case you didn’t already know it (and I suspect that’s most people), you don’t have to actually be fired in order to be considered fired from a job under New York law, and thereby effectively invalidate the non-compete agreement. But as you might suspect, the test to satisfy this doctrine, which in legalese is called “constructive termination” or “constructive discharge,” is difficult to prove.

The test for constructive discharge was established by the Federal courts, and occurs “when the employer, rather than acting directly, deliberately makes an employee’s working conditions so intolerable that the employee is forced into an involuntary resignation” ( Pena v. Brattleboro Retreat, 702 F.2d 322, 325 [2d Cir.1983]. A claimant can prove that she was constructively discharged by establishing that the working conditions “[were] so difficult or unpleasant that a reasonable person in the employee’s shoes would have felt compelled to resign” ( Pena, 702 F.2d at 325 ).

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It seems to me that many people are under the impression that your hands are completely tied, and you have no immediate recourse to the New York State courts if your former employer breaches your severance agreement. While in many cases, e.g., where the severance plan is governed by ERISA (in which case a common law breach of contract is automatically barred (“pre-empted”), these cases may prove quite difficult, there are some cases – and they are not insignificant – where a discharged employee can still recover damages for unpaid severance benefits.

So what does a plaintiff have to prove in order to win one of those cases?

Although the list is short, as a practical matter marshaling this proof is not simple:

The plaintiff must prove “that the employer made a regular practice of making severance payments and that the plaintiff detrimentally relied on the severance policy, Skarren v Household Finance Corp., 296 AD2d 488, 745 NYS2d 556; Hirschfeld v Institutional Investor, Inc., 260 AD2d 171, 688 NYS2d 31; see Gallagher v Ashland Oil, Inc., 183 AD2d 1033, 583 NYS2d 624; see also Spencer v Christ Church Day Care Center, Inc., 280 AD2d 817, 720 NYS2d 633 (in order to recover for accumulated vacation time, at will employee must establish regular practice of paying employees unused vacation and reliance upon that practice in accepting or continuing position).”

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As noted in my article “How NY Employee’s Bad Act Can Lead to Finding of Employer Negligence,” there is a doctrine in New York which holds that under certain circumstances, an employer can be held liable for its employees acts – even where those acts were clearly not undertaken in furtherance of the employer’s interests. One such example would be the upstate New York case of O’Keefe v. Supermarkets International, where a jury held the defendant supermarket responsible for the plaintiff’s injuries because the defendant ignored  numerous complaints about the store clerks’ inappropriate behavior, and ultimately, the plaintiff was injured as a result. (Naturally, these claims are not limited to the personal injury realm.)

So how do you prove one of these claims?

The plaintiff is required to prove the following 4 things: (1) that defendant’s employee AB was demonstrably incompetent, a particularly poor disposition, or given to reckless behavior; (2) that defendant either knew or should have known about this problem; (3) that the defendant could reasonably have foreseen that this employee’s “issues” would be likely to result in harm or damage to others; and, (4) that the defendant nevertheless failed to undertake appropriate care to either correct or fire this employee.

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In the wake of the massive layoffs of the last few years, I’ve been asked this question an awful lot. (If you’re looking for a link to what a typical non-compete clause looks like, keep reading).

Fortunately, the Court of Appeals – New York State’s highest court, has written rather extensively on the subject. In my view, here are the most pertinent parts:

“A restraint is reasonable only if it: (1) is no greater than is required for the protection of the legitimate interest of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public … A non-compete agreement must also be reasonably limited temporally and geographically.”

Well, that’s awfully vague, you say. And you’re right.

(For purposes of illustration, here’s some sample non-compete language).

But the Court gave us a clearer insight into the policy considerations that help determine whether a particular non-compete provision will be upheld:

“Undoubtedly judicial disfavor of these covenants is provoked by ‘powerful considerations of public policy which militate against sanctioning the loss of a man’s livelihood’ …

“Indeed, our economy is premised on the competition engendered by the uninhibited flow of services, talent and ideas. Therefore, no restrictions should fetter an employee’s right to apply to his own best advantage the skills and knowledge acquired by the overall experience of his previous employment. This includes those techniques which are but ‘skillful variations of general processes known to the particular trade.’

“Of course, the courts must also recognize the legitimate interest an employer has in safeguarding that which has made his business successful and to protect himself against deliberate surreptitious commercial piracy.”

So where does that leave us?

Here’s the Court’s conclusion:

“Restrictive covenants will be enforceable to the extent necessary to prevent the disclosure or use of trade secrets or confidential customer information.”

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