Q: I work as an employee for a small tutoring company. I am looking to resign and have questions about the contract.
My current contract is for a tutor as an employee. In my current contract, these are the only two provisions related to client payment and referrals:
Tutor agrees to accept no direct payment from clients (current and past) introduced by (company name) . All payments from clients will be made to (company name).
Tutor agrees to refer all leads to (company name) of potential new clients recommended by our current and past clients. If such a potential client utilizes the service of a (company name) tutor, then payment for these services will be made to (company name).
If I am no longer an employee, are these applicable? Meaning, can I legally tutor my current clients (who are willing to tutor with me separately from the company) through my own LLC if I resign?
A:
At the threshold, interpretation of contracts and their associated non-compete clauses requires a detailed analysis of the document, focusing on its language, its intended purposes, and its compliance with background law and public policy. It is really not possible to advise on the effect of a contract without actually reviewing that particular document in detail.
That being said, non-compete agreements are generally disfavored by New York courts and will not be enforced absent a showing that they protect “legitimate business interests.” This test focuses on the facts and circumstances of your employment.
There is also new FTC regulation prohibiting most non-competes, but it was enjoined by a federal court last week and most legal scholars expect that the rule will be overturned by that court sometime around late August. Meaning that this rule likely will not help you much. Instead, you must focus on disputing enforceability under state law and governing case precedent.
Tim Akpinar agrees with this answer
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