I represent executives transitioning employment, and many are subject to onerous restrictive covenants prohibiting solicitation of all clients. I have written before that such unreasonable restrictive covenants can result in explosive litigation. See here.
In this area of the law, there is no case more important to employees/executives than BDO Seidman v. Hirshberg, a 1999 decision by the New York Court of Appeals. I have relied upon this case in countless disputes with employers.
The BDO Seidman decision lays out a practical test distinguishing between clients that employers may protect with non-solicit agreements and clients that employees may continue to solicit regardless of the terms of their non-solicit agreements. The test asks whether it was the employer or the employee who invested the time, money, and effort to establish the relationship with a client. In my experience, the test allows employees to continue to solicit most clients who are important to them.
Interestingly, when BDO Seidman was decided some commentators criticized the decision for being anti-employee because it recognized a segment of clients who were presumptively off-limits from solicitation. However, the benefit of bright lines should not be underestimated. The time and expense required to litigate these issues is often prohibitive. Many executives therefore would rather have a clear right to solicit 75% of clients with whom they have close relationships than a theoretical right to solicit 100% of an employer’s clients.
The BDO Seidman decision has been cited by more than 300 other published decisions over its 22 years. But it’s actual impact is greater still.
BDO’s framework often drives pre-litigation negotiations between employers and employees sparring over the terms of separation agreements and severance. Further, many non-solicit cases are litigated through fast-paced TRO and PI applications which may not result in published decisions even though the BDO Seidman framework played a starring role in those cases.
In my area of practice, therefore, it’s not an exaggeration to say that BDO Seidman is one of the most important NY civil rights cases for employees in our time.