What Makes a Non-Compete Agreement Unenforceable in New York?
If you’re one of the many Americans bound by a non-compete agreement, you may understandably feel frustrated.
By limiting when and where you search for a new job, non-compete agreements can restrict your earning potential, derail your career goals, and put stress on your personal and professional relationships.
But many people don’t realize that signing a non-compete agreement doesn’t necessarily mean you’re trapped.
Thanks to growing criticism of the negative effects that non-compete agreements have on economic growth, more and more states are passing laws that ban or severely limit when and how they’re enforced.
New York state law, for example, includes specific case law aimed at fighting overly broad non-compete agreements.
This means that even if you work in New York and have signed one, your employer may not be able to enforce its restrictions on your job search.
In this blog post, we’ll walk you through what a non-compete agreement entails, the requirements that a business has to meet to enforce one in New York, and the steps that employers must take to prove their non-compete agreements are enforceable.
What Is a Non-Compete Agreement?
A non-compete agreement is designed to prevent workers from supporting the competitors of a former employer. Agreements do this by barring individuals from obtaining work:
- For a set period of time after leaving a job,
- In certain geographical areas, or
- With other companies in the same industry.
Restrictions on the time and location of future employment can vary from company to company. Usually, workers are limited from finding a new job from six months to a year after their departure, but some clauses can operate for even five years.
Some clauses restrict job seekers from finding work in their state, and some are nationwide and even worldwide.
Beyond being banned from taking a new position with a competitor, former employees are also often prohibited from starting their own businesses in the same industry.
Although these agreements are intended to help companies protect their intellectual property and commercial interests, businesses today often exploit them to gain an edge on their competitors at their workers’ expense.
Companies are increasingly pushing non-competes on workers where there’s no legitimate cause: executives without access to legally protected information, rank-and-file employees, and even low-wage workers at sandwich franchises.
The good news? A great many of the non-compete agreements signed today wouldn’t actually be enforced in New York and certain other states.
Why? More and more states, like New York, have enacted laws aimed at protecting workers from overly broad and unnecessary non-competes that limit mobility and contribute to wage stagnation.
This means that even if you have signed one, a judge would only enforce it if your job and your employer’s restrictions fall under very specific circumstances.
What Makes a Non-compete Agreement Enforceable In New York?
In New York state, an employer’s non-compete agreement has to meet five very specific criteria to merit enforcement:
- You were fired for cause or have resigned.
A non-compete agreement can only be enforced if your employer has a specific reason (“cause”) for your termination — for example, incompetence, poor work quality, or behavioral misconduct — or if you’ve voluntarily left your position.
But if you’re fired without cause, then there is some good news: a court generally won’t find your non-compete agreement enforceable.
- It must be necessary to protect the employer’s legitimate business interests.
Of these five points, this is the most important element that an employer must prove for a non-compete to be enforceable.
Only specific types of confidential or proprietary information can be protected as “legitimate business interests”: trade secrets, confidential customer lists, or highly specialized skills unique to the job.
Unless you’re working at a deep level of research and development, it’s rare for most employees even at the executive level to have access to the type of information that is protected here: KFC’s head of marketing doesn’t necessarily have access to the brand’s secret blend of 11 herbs and spices.
- It must not impose an undue hardship on the employee.
Similarly, companies often go wrong by drafting non-competes that are so broad in their restrictions that they place an unreasonable burden on an employee: say, by barring them from seeking work in an entire sector or industry — not just with a company’s direct competitors.
If Tesla were to prohibit their chief technology officer from using their skills and experience to find work in any tech enterprise, not just competing auto companies, that could constitute an unreasonable hardship and potential grounds for invalidating the non-compete.
- It must not harm the public.
If your job contributes to public health or welfare, then a non-compete agreement that bars you from performing your work could also be unenforceable.
This is especially significant if there aren’t many other people in your city or region with the education and training needed to perform your work, as might be the case for medical professionals or those working in environmental protection.
- It must be reasonable in the time period and geographic scope.
What makes the temporal and geographic limits on your job search reasonable will be determined in part by your personal circumstances and your employer’s restrictions.
A non-compete that demands a substantial move — say, one that bars you from working with competitors in all the New York tri-state area — could be unreasonable, as could one without a fixed end date.
How To Fight a Non-compete Agreement In New York
For your employer to enforce your non-compete agreement, they need to prove that it meets all five of these criteria.
If this is not the case, a judge will frequently throw out the agreement entirely, or else require that an employer revise the agreement.
For instance, to limit the ban on employment to a shorter period of time or smaller geographical area.
If you want to fight your non-compete, you’ll need to have a clear understanding of a few points:
- Did you resign, or did your boss have a specific reason for ending your employment? Many non-competes can be invalidated simply by showing that you were fired without cause.
- What constitutes a legitimate business interest to your employer: How does your employer define internally produced intellectual property? What steps does it take to protect the internal resources you used in the performance of your job?
- Your former job obligations and the tools you used to fulfill them: Did your work involve research and development? Are the skills and knowledge involved in your role commonly or acquirable within your industry? How and in what manner did you interact with confidential customer information or intellectual property?
- The language of the agreement you signed: How strictly is your employment search constrained? Does the agreement prohibit you from working with enterprises in your industry broadly, or only specifically with your company’s competitors? What kind of personal, financial, or professional challenges would complying with the terms of the agreement pose to you?
Get in Contact with a Non-Compete Lawyer Right Away
An attorney well-versed in the latest developments of employment law in New York state can help you navigate your job contract and evaluate the terms of a non-compete agreement.
Consulting with an experienced employment lawyer is essential to ensure you understand your rights and are empowered to build a compelling case against your employer.