Non-compete agreements are common in executive contracts, partnership deals, and professional services firms. But in New York, just because a contract says you cannot compete doesn’t mean that clause is enforceable.
Whether you’re being asked to sign a non-compete or considering enforcing one, here’s what you need to know about their limits and risks in New York.
What Is a Non-Compete Agreement?
A non-compete clause is a contract provision that restricts an individual from working for a competitor or starting a competing business, typically for a certain period of time and within a defined geographic area. They are often included in:
- Executive Employment Agreements
- Employee Equity Agreements
- Shareholder or Partnership Agreements
- Sale-of-Business Contracts
- Independent Contractor or Consulting Agreements
While businesses use them to protect competitive interests, New York courts don’t enforce them lightly.
The Legal Standard in New York
In New York, non-competes are generally disfavored unless they meet strict criteria. To be enforceable, the restriction must be:
- Necessary to protect a legitimate business interest (first and foremost)
- Reasonable in time and geographic scope
- Not overly burdensome to the employee
- Not harmful to the public
If a court finds the restriction too broad or unnecessary, it won’t enforce it.
What Counts as a Legitimate Business Interest?
A company may be justified in restricting competition to protect:
- Trade secrets or confidential information
- Client relationships or goodwill, particularly in industries with personal client loyalty
- Unique or specialized services that are difficult to replace
However, simply wanting to prevent competition or retain talent is not enough. The burden is on the employer to show that enforcement is necessary, not just convenient.
Where Non-Competes Fail
We regularly see non-competes challenged—and defeated—for the following reasons:
Overly broad scope. One agreement tried to block a departing executive from working for any company in the same “industry” nationwide for two years. The problem? The definition of “industry” included nearly every major employer in the executive’s field, effectively preventing him from working at all. Courts are unlikely to enforce such broad restrictions.
No real competitive threat. In another matter, an employee with no client contact, no access to trade secrets, and no strategic role was subject to a one-year non-compete. The court refused to enforce it, ruling that the company had no genuine risk to protect. Essentially, no legitimate business interest.
Inconsistent enforcement. An employer attempted to enforce a non-compete against one former employee, but ignored others who left under similar terms. This selective enforcement undermined the argument that the restriction was truly necessary.
Timing and leverage matter. Enforcement of non-competes often comes down to timing and leverage. For example:
- Was the non-compete signed at the beginning of employment, or slipped in later without new compensation?
- Was it presented with time to review and negotiate, or under pressure?
- Does the agreement provide severance or compensation during the restricted period?
All of these factors may affect whether a non-compete will hold up in court.
What About Non-Solicit and Confidentiality Clauses?
Even if a non-compete is unenforceable, employers may still be able to enforce non-solicitation and confidentiality clauses. These provisions typically prevent former employees from:
- Soliciting clients or employees
- Using or disclosing confidential business information
These clauses are more likely to be enforced, especially if they’re narrowly tailored and tied to legitimate business interests.
What to Do Before You Sign or Enforce a Non-Compete
If you’re an executive or professional:
- Review any non-compete with counsel before signing
- Negotiate for clarity, fairness, and compensation if it may limit your future
- Understand your rights if you plan to leave a role and re-enter the market
If you’re a business owner or employer:
- Don’t assume all non-competes are enforceable—draft narrowly and thoughtfully
- Consider whether other protections, like confidentiality or non-solicit clauses, would be more effective
- Be consistent in how you apply and enforce these agreements to avoid legal challenges
Conclusion
In New York, non-compete agreements live in a legal gray zone. The more aggressive the restriction the less likely it is to be enforced. Whether you’re entering a new role or managing employee transitions, it pays to get it right from the start.
At The Glennon Law Firm, P.C., we guide professionals and business leaders through the legal, financial, and strategic implications of restrictive covenants. If you’re facing a non-compete issue—either enforcing or challenging one—we’re here to help.
Contact us to schedule a confidential consultation today.
You may learn more about us and how we operate by visiting these pages: About Us and What Sets Us Apart.
To learn more about these topics, check out our Legalities & Realities® Podcast and other related blog posts:
- Podcast: Medical, Dental, and Healthcare Non Compete Agreements
- Blog Posts: Preliminary Injunctions and Business Asset Sale-Based Non-Compete Agreements: A Comprehensive Guide
This blog post is for informational purposes only and does not constitute legal advice. For specific legal counsel, please contact our office directly.