Local 1115 Joint Bd. Nursing Home v. Nomberg, 43 N.Y.2d 795 (1977)
An arbitrator’s award enforcing a restrictive covenant of employment is not automatically unenforceable as against public policy; disputes involving such covenants can be submitted to arbitration by mutual consent.
Summary
This case addresses whether an arbitrator’s enforcement of a restrictive covenant is unenforceable as against public policy. Murray Nomberg, a former business agent for Local 1115, was enjoined by an arbitrator from working for a rival union, Local 144, based on a restrictive covenant in his employment agreement. The New York Court of Appeals reversed the Appellate Division’s vacatur of the award, holding that while public policy disfavors restrictive covenants, they are not per se unenforceable and can be subject to arbitration. The court emphasized the limited scope of judicial review of arbitration awards.
Facts
Murray Nomberg was employed by Local 1115 as a business agent. His employment agreement included a restrictive covenant preventing him from organizing workers for other labor organizations in New York, Pennsylvania, New Jersey, and Connecticut for five years after termination. The agreement also contained a broad arbitration clause. Nomberg left Local 1115 in 1976 and began working for Local 144, a rival union. Local 1115 sought arbitration to enforce the restrictive covenant and prevent Nomberg’s employment with Local 144.
Procedural History
Local 1115 initiated arbitration proceedings against Nomberg. The arbitrator ruled in favor of Local 1115, enjoining Nomberg from working for Local 144 for five years. Special Term confirmed the arbitrator’s award. The Appellate Division reversed, vacating the award as against public policy. The New York Court of Appeals reversed the Appellate Division and reinstated the Special Term’s judgment confirming the award.
Issue(s)
Whether an arbitrator’s award enforcing a restrictive covenant of employment is unenforceable as contrary to public policy, thus exceeding the arbitrator’s power.
Holding
No, because disputes involving restrictive covenants of employment can be submitted to arbitration, and an arbitrator’s award enforcing such covenants will not be vacated on public policy grounds unless the covenant is per se unenforceable.
Court’s Reasoning
The court acknowledged the public policy concerns against depriving the public of a person’s industry and preventing individuals from supporting themselves. However, it emphasized the strong policy favoring arbitration as a means of dispute resolution. The court stated that arbitration awards are generally not subject to judicial review for errors of law or fact. “An arbitrator’s paramount responsibility is to reach an equitable result, and the courts will not assume the role of overseers to mold the award to conform to their sense of justice.”
The court recognized that an award violating public policy will not stand, citing examples such as punitive damages and violations of antitrust laws. However, it emphasized that intervention is limited to cases where public policy, embodied in statute or decisional law, absolutely prohibits the matter being decided or the relief granted. The court must be able to examine the arbitration agreement or award on its face, without extensive analysis, and conclude that enforcement is precluded by public policy.
While restrictive covenants are disfavored, they are not per se unenforceable. Enforceability depends on reasonableness in time and area, necessity to protect the employer’s legitimate interests, harm to the public, and burden on the employee. Because the parties submitted the issue to arbitration, the arbitrator had the power to determine the reasonableness and necessity of the restrictions. “Insofar as public policy considerations do not absolutely preclude the enforcement of restrictive covenants of future employment for a reasonable period of time or related business concerns, we conclude that the arbitrator had the power to pass upon the issue of both the reasonableness and the necessity of the restrictions imposed upon the employee.” The court deferred to the arbitrator’s decision, emphasizing that it would not second-guess factual findings or legal conclusions.
The court also dismissed the respondent’s claim of arbitrator bias, noting that the arbitrator was named in the agreement and receiving compensation from the union was insufficient to establish bias.