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NYC Litigation Blog

Thursday, March 16, 2017

Drafting an Enforceable Non-Compete Agreement in New York

What requirements must a non-compete agreement meet to be enforceable in NYC?

Non-compete agreements can help employers to protect their trade secrets and keep employees from leaving to work for competitors. By signing a non-compete agreement, employees agree not to work for direct competitors or open a competing business for a specified period of time.  While non-compete agreements can prove essential for many New York City employers, they must be carefully drafted to avoid being struck down.  New York courts have been loath to enforce far-reaching non-compete agreements as they can have a detrimental effect on enterprise.  

Creating an Enforceable Non-Compete Agreement

New York City employers seeking to adopt a non-compete agreement should consult with an experienced non-compete agreement attorney.  These agreements must meet strict legal standards and even some of the most carefully drafted agreements have been found unenforceable in recent years because they are too far reaching.  Certain industries and professions have specific statutes or regulations that they must abide by, including attorneys and financial industry employees.  Failure to follow these requirements will give employees an easy way out of the agreement.

Reasonableness

New York law generally disfavors non-compete agreements as an unreasonable restraint to free trade.  However, courts may enforce a non-compete agreement if the restriction is reasonable.  Reasonableness is determined on a case by case basis, with an agreement only considered reasonable if it:

  • Is no greater than required to protect the employer’s legitimate interests;
  • Does not impose undue hardship on the employee;
  • Does not injure the public;
  • Is reasonable in its duration and geographic scope.

An employer’s legitimate protectable interests could include the employer’s goodwill, trade secrets, and interests in preventing loss of an employee with unique or special services to a competitor.  The reasonableness of duration and geographic scope will vary depending on the employer’s interests and type of business.  Courts in New York have generally held that restrictions of six months or less are reasonable, while geographic restrictions greatly vary.  In one New York case a radius of 50 miles was found unreasonable, while another case upheld restrictions to the metropolitan areas of New York, Los Angeles, Toronto, and Continental Europe.  

Given the complexities involved in drafting an enforceable non-compete agreement, New York City employers are encouraged to consult with our employment law attorneys at Thomas M. Lancia PLLC for individualized assistance with your important employment law matter.  


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