Non-Compete Law In The State Of New York

by ECL Writer
Non-Compete Law In New York

Non-compete agreements or laws, also known as restrictive covenants, are agreements between an employer and an employee in which the employee agrees not to compete with the employer for a certain period of time after the termination of their employment. These agreements are typically used to protect an employer’s confidential information, customer relationships, and other proprietary assets. In the state of New York, non-compete agreements or laws are governed by common law principles and are subject to a reasonableness standard.

The enforceability of non-compete agreements in New York is determined by a three-part test. First, the agreement must protect the legitimate business interest of the employer. Second, the restriction must be reasonable in time and scope. Third, the restriction must not be harmful to the public.

A legitimate business interest is something that is essential to the employer’s business and not merely ancillary to it. Examples of legitimate business interests include trade secrets, confidential information, and customer relationships. However, an employer cannot use a non-compete agreement to prevent an employee from working in their chosen profession or trade.

The reasonableness of the restriction is determined by the duration of the restriction, the geographical area covered, and the scope of the restriction. A restriction that lasts for several years, covers a large geographical area, and prevents an employee from working in the same field, would likely be considered unreasonable. On the other hand, a restriction that lasts for a shorter period of time covers a smaller geographical area, and only applies to specific customers, would be more likely to be considered reasonable.

Finally, the restriction must not be harmful to the public. An agreement that would prevent an employee from working in a specific field or geographical area would likely be harmful to the public.

What Employers Should know

In New York, an employer must also show that the non-compete agreement is necessary to protect their legitimate business interests. This means that the employer must show that they cannot protect their interests through other means, such as through the use of confidentiality agreements or non-disclosure agreements.

In recent years, the New York courts have become increasingly skeptical of the enforceability of non-compete agreements, especially when it comes to low-level employees. This is because these agreements can have a significant impact on an employee’s ability to earn a living and can limit their mobility in the job market. As a result, courts have become more likely to strike down non-compete agreements that are overly restrictive or that are not necessary to protect the employer’s legitimate business interests.

It is also important to note that New York courts have held that non-compete agreements must be supported by consideration. This means that an employer must give something of value to the employee in exchange for the non-compete agreement. This can be in the form of a raise, a promotion, or other benefits.

Non-Compete Law In New York
Image – Pexels.com

Do I Have To Sign A Non-Compete?

Whether you have to sign a non-compete agreement depends on the specific terms of your employment and the laws of the state in which you work. In general, non-compete agreements are legally binding contracts, and if you sign one, you are obligated to abide by its terms.

However, non-compete agreements are not always enforceable, and in some states, including New York, non-compete agreements are subject to a reasonableness standard and must protect a legitimate business interest of the employer, be reasonable in time and scope, and not be harmful to the public. Additionally, non-compete agreements must be supported by consideration and the employer must show that the agreement is necessary to protect their legitimate business interests.

If you are asked to sign a non-compete agreement, it is important to understand the terms of the agreement and what it would mean for your future employment prospects. You may want to consider consulting with an attorney to review the agreement and advise you on your rights and obligations. If you have concerns about the agreement, you can try to negotiate the terms with your employer, or decline to sign the agreement and seek employment elsewhere.

It is important to note that if you are already employed and your employer is asking you to sign a non-compete agreement, and you refuse to sign it, it could lead to the termination of your employment.

Non-Compete Law In New York
image – pexels.com

How Could A Non-Compete Affect Employees?

Non-compete agreements can have a significant impact on employees, particularly when it comes to their ability to earn a living and their mobility in the job market. Some of the ways that non-compete agreements can affect employees include:

  1. Limiting job opportunities: Non-compete agreements can restrict an employee’s ability to work in the same field or industry after they leave their current employer. This can make it difficult for the employee to find new employment, particularly in the same field or industry that they are familiar with.
  2. Reducing earning potential: Non-compete agreements can also limit an employee’s earning potential by preventing them from working for competitors or starting their own business. This can have a significant impact on the employee’s financial stability and their ability to support themselves and their family.
  3. Impacting career advancement: Non-compete agreements can also make it more difficult for employees to advance in their careers by preventing them from taking on new challenges and opportunities.
  4. Stifle innovation: Non-compete agreements can also stifle innovation by preventing employees from sharing ideas and best practices with other companies. This can have a negative impact on the economy and the overall competitiveness of the industry.
  5. Legal Fees: Employees who are asked to sign a non-compete agreement may incur legal fees to review the agreement and advise them on their rights and obligations. Additionally, if they want to challenge the agreement in court, they may incur additional legal fees.

It is important to note that not all non-compete agreements are created equal, and some may be more restrictive than others. It is crucial for employees to understand the terms of the agreement and what it would mean for their future employment prospects before signing it.

Non-Compete Law In New York
Image – Pexels.com

How Do Employers Enforce Non-Competes?

Employers can enforce non-compete agreements in a number of ways. Some of the most common methods include:

  1. Legal action: If an employee violates a non-compete agreement, the employer can file a lawsuit against the employee to seek an injunction (a court order to stop the employee from working for the competitor) and/or damages.
  2. Damages: If an employee violates a non-compete agreement and causes harm to the employer, such as by taking customers or confidential information, the employer can seek damages.
  3. Monitoring: Employers can monitor the employee’s activities after they leave the company to ensure that they are not violating the non-compete agreement. This can include monitoring social media, online directories, and other publicly available sources of information.
  4. Injunctions: Employers can seek an injunction to prevent the employee from working for a competitor while the lawsuit is pending.
  5. Contacting the new employer: Employers can contact the new employer and inform them of the non-compete agreement and ask them to terminate the employee’s employment.
  6. Mediation or arbitration: Employers can also choose to resolve disputes through mediation or arbitration, which can be a faster and less expensive alternative to going to court.

It is good to note that the enforcement of non-compete agreements is subject to the laws of the state in which the employee works, and different states have different standards for the enforceability of non-compete agreements. Additionally, some states have laws that limit the enforceability of non-compete agreements, making it harder for employers to enforce them.

Also to note that employers must have a valid reason to enforce a non-compete agreement, such as protecting their confidential information, trade secrets, or customer relationships. Additionally, non-compete agreements must be reasonable in terms of duration and geographical scope, and not harmful to the public.

This blog is ONLY for informational or educational purposes and DOES NOT substitute professional legal advise. We take no responsibility or credit for what you do with this info.