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Sunday, July 28, 2019

ADP, LLC VS. ERIK KUSINS ADP, LLC VS. RYAN HOPPER ADP, LLC VS. ANTHONY M. KARAMITAS ADP, LLC VS. NICK LENOBLE ADP, LLC VS. MICHAEL DEMARCO ADP, LLC VS. DANIEL HOBAICA (C-000264, C-000023-16, C-000143-16, C-000117-16, C-000120-16, AND C-000118-16, ESSEX COUNTY AND STATEWIDE) (CONSOLIDATED) (A-4664-16T1/A-0692-17T3/A-0693-17T3/A-2990-17T4/A-4407-17T4/A-4527-17T4)

In these consolidated appeals, the court considers the enforceability of the restrictive covenant agreements (RCAs) executed by the six defendants during their employment with plaintiff ADP, LLC. Each defendant was a top-performing sales representative. To award and incentivize their success, ADP invited defendants to participate in a stock award incentive program conditioned on their acceptance and execution of an RCA. The RCA included non-solicitation and non-compete provisions that restricted an employee from soliciting ADP's clients and competing with ADP upon leaving the company. The defendants left ADP at varying times and each accepted employment with the same direct competitor.
The court concluded that ADP demonstrated a legitimate and protectable interest in its customer relationships sufficient to justify enforcing the RCAs. However, the court also found the RCAs were overly broad and imposed an undue hardship on defendants. Therefore, the court blue-penciled the non-solicitation and non-compete provisions.
The court held that ADP may only prohibit its employees, upon separation from the company, from soliciting any of ADP's actual clients with whom the former employee was directly involved or who the employee knew was ADP's client.
As to the solicitation of prospective clients, the court found it unreasonable and onerous to restrict defendants from soliciting clients unknown to them while at ADP. Therefore, when working for a competitor, a former employee is only prohibited from soliciting a prospective ADP client if the employee gained knowledge of the potential client while at ADP and directly, or indirectly, solicits that client after leaving.
In considering the non-compete provision, the court determined it was reasonable for ADP to restrict its former employees, for a reasonable time, from providing services to a competing business in the same geographical territory in which the employee operated while at ADP.
The court reverses the summary judgment orders in favor of each defendant. Because each defendant breached the RCAs to some extent, the court remands the cases to the trial court to determine the appropriate remedy for the breach and to consider ADP's applications for counsel fees.