Spring 2019 Article
Non-Compete & Non-Solicitation Agreements Under New York Law
What are non-compete and non-solicitation agreements?
A non-compete agreement prohibits an employee from working for a competitor or opening a competitive business during the employment and, typically, also for a certain period of time after an employee leaves a job.
On the other hand, a non-solicitation agreement prevents an employee from taking customers and/or other employees with them after termination of their employment for a certain period of time (generally, one year).
Are non-compete agreements enforceable in New York?
New York courts will enforce a non-compete agreement only if the agreement: 1) is necessary to protect the employer’s legitimate interests, (2) does not impose an undue hardship on the employee, (3) does not harm the public, and (4) is reasonable in time period and geographic scope.
An employer’s legitimate interest is restricted to protecting the employer’s trade secrets, confidential information, and preventing employees from taking specialized skills they gained on the job to a competitor. If a non-compete is not necessary to protect such interests, and would restrict the employee’s ability to find a job, a court is unlikely to enforce it. Also, in order for the agreement to be enforceable, the non-compete must have a reasonable duration (less than a year) and a limited geographic scope. For example, a non-compete agreement will be considered overly broad and thus unenforceable if:
The agreement covers a period of time that is more than one year after an employee has left the job; or
The agreement restricts an employee across the entire United States, or covers areas beyond where the employer actually does business.
Finally, New York courts have begun to consider whether non-compete agreements are enforceable in the event the employee is fired “without cause”. A recent decision of the New York Court of Appeal stated that non-compete agreements are unenforceable if the employer is no longer willing to employ the person and has fired the employee for no fault of his own. In other words, if the employment is terminated without cause, the non-compete clause is considered unenforceable and the employee is free to go and work for a competitor of the former employer.
Consider the following questions regarding a non-compete agreement:
What businesses are considered competitors? A non-compete may not be enforceable if the definition of a competitor is too broad or prevents an employee from working in an entire sector or industry.
How long does the non-compete period last? Non-competes should be limited in time.
What geographic area does it cover? Is the geographic scope so large that employee might have to move to get a job with another employer in the industry?
Is the employee getting anything in exchange for signing the non-compete? For example, some employers provide a bonus or specialized training, guarantee employment for a certain time, or provide payment for some or all of the non-compete period in exchange for signing a non-compete.
Can an employee have a lawyer review the language and advise employee on its potential consequences or negotiate with the employer on his behalf? Yes, an employee can have a lawyer review the non-compete agreement.
Are non-solicitation agreements enforceable in New York?
New York non-solicitation law closely follows the rules for non-compete agreements because it is stated that a non-solicitation agreement is enforceable only if the restriction imposed is: i) no greater than necessary to protect the legitimate business interests of the employer, ii) does not impose an undue hardship on the employee, and iii) does not harm the public. Generally, these agreements will be enforced when they have the scope to prevent an employee’s solicitation or disclosure of trade secrets, confidential information regarding the employer’s customers, or in those cases where the employee’s services are deemed special or unique. On the other hand, a court is likely to reject a claim that the solicitation would destabilize the company’s workforce, cause the company to lose significant costs incurred in recruiting, hiring, training, and educating its employees, or cause mass resignations.
While enforcement of a non-solicitation focuses on whether the provision protects a legitimate interest of the employer, the provision also needs to be reasonable and cannot impose an undue burden on the employee or injure the public. In other words, the restriction must be limited in time and scope. Generally, a court is likely to enforce the agreement if the restriction is limited to a 1-year period.
Finally, in drafting non-solicitation agreement, employers should carefully consider what legitimate interests they are trying to protect and take steps to tie these provisions to safeguarding trade secrets, confidential information, unique employees and client relationships. Employers should consider limiting these agreements to competitive businesses.
Requests for information or insights on the issue discussed in this article may be addressed to firstname.lastname@example.org. This article is for information purposes only and does not constitute legal advice. The information contained herein may be outdated or incomplete, and shall in no way be taken as an indication of future results. The transmission of this article is not intended to create, nor does its receipt constitute, an attorney-client relationship between preparer and reader. You should not act on the information contained in this article without first seeking the advice of an attorney.
 New York Attorney General, Frequently Asked Questions. https://ag.ny.gov/sites/default/files/non-competes.pdf.
 Buchanan Capital Markets, LLC v. DeLucca, 41 N.Y.S.3d 229 (N.Y. App. Div. 2016).
 BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 388-389 (1999).