New York Noncompete Agreement: What's Included and Enforceability

Quick Facts — Noncompete Agreement Lawyers

Is a Non-Compete Agreement Enforceable in New York?

Yes. New York allows employers to enforce non-compete agreements against employees to protect their legitimate business interests. To be enforceable in New York, a non-compete agreement must pass a test that was established by the Supreme Court of New York called the three-prong test:

  1. Protectable interest. The non-compete agreement must protect a legitimate business interest and can be no more restrictive than necessary to protect this interest.
  2. Undue hardship. The employee cannot face undue hardship as a result of the restrictions of the non-compete agreement.
  3. Public policy. The non-compete agreement cannot be injurious to the public.

An example of a non-compete agreement that is injurious to the public would be an agreement that prohibits a doctor from practicing medicine in a certain area which would limit the public’s ability to select certain doctors for treatment.

What is a Protectable Business Interest in a New York Non-Compete Agreement?

If a non-compete agreement doesn’t protect a legitimate business interest, it will be unenforceable. The New York Supreme Court has determined that the following interests qualify as “protectible business interests”:

  • Trade secrets
  • Confidential customer information
  • Employer’s client base or client lists

In addition, a non-compete agreement can be used to protect an employer from irreparable harm where an employee’s services are unique.

How Long Does a New York Non-Compete Agreement Last?

The Supreme Court of New York has determined that 2 years is a reasonable length of time for a non-compete agreement to last. In addition, the courts have recognized that five years is reasonable for a non-compete agreement that is used when selling a business.

How Do You Get Around a Non-Compete Agreement in New York?

If an employee wants to get around a non-compete agreement in New York, there are a couple of ways this can be accomplished.

  1. The legitimate interest test. Non-compete agreements in New York must serve the purpose of protecting a legitimate business interest. To get out of a non-compete agreement, an employee can show that the contract is not protecting a legitimate interest.
  2. Breach of contract. Most non-compete agreements are part of a larger employment contract. If an employer has breached any part of the employment contract, it will be difficult to enforce the non-compete agreement.
  3. Lack of specific language. To enforce a non-compete agreement, the contract terms need to be specific and cannot be overly broad. If an employee is prohibited from working for a competitor, it must state in what capacity. A non-compete agreement cannot stop an employee for working for a competitor in a different type of job. This is often called the “janitor rule” because courts use the example that a CEO of one company cannot be prohibited from being employed as a janitor at a competing company.
  4. Lack of competition. The purpose of a non-compete agreement is to prevent unfair competition to an employer’s business. If an employee can prove that they are not in competition with the employer, a non-compete agreement cannot be enforced.

What Voids a New York Non-Compete Agreement?

There are several ways that a New York non-compete agreement can be determined void by a court. These reasons include:

  1. The employee was fired without cause.
  2. The terms of the contract impose undue hardship on the employee and their ability to find work.
  3. An employee’s job skills are rare and necessary for public health.
  4. The duration is too long or the geographic boundary is too large.

If any of these conditions apply to a non-compete agreement, it may be deemed void by the court.

Frequently Asked Questions

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I am an entrepreneur who recently signed a Noncompete Agreement with a potential business partner, and I am looking to gain a better understanding of the time restrictions that are in place. I am concerned that the terms of the agreement may prevent me from pursuing other opportunities in the future and want to make sure I am aware of all the restrictions before making any decisions.

Gagandeep K.

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The non-compete agreement will likely specify the non-compete period/time restriction. If that is not obviously stated, you should consider having an attorney review the non-compete agreement. Typically, a non-compete agreement in a partnership or LLC places a geographic limitation for a certain time period such that the partner/member is prevented from carrying-on a similar business in a geographic area where the partnership/LLC has done and continues to do business. You can read more about non-compete agreements in California here: https://www.contractscounsel.com/t/us/noncompete-agreement/california.

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I recently left my job of five years and have been offered a new position with a competitor. The new employer has asked me to sign a noncompete agreement. I am concerned about the geographic scope of the agreement and need to understand what areas it would cover, and if it would prevent me from taking a position with a competitor in another state or country.

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