5 Ways to Beat a Non-Compete Agreement in New York

Ottinger Employment Lawyers Can Help with Non-Compete Agreements

New York non-compete agreements are widely abused and overused.   Most of them are not enforceable because New York disfavors them. New York courts will only enforce them in only very rare limited situations.  

As explained more below, we are able to defeat most non-compete agreements by using the Legitimate Business Interests Test. A court will only enforce a non-compete agreement if the company can satisfy this test and most companies cannot do so.   

Non-compete agreements were historically used by companies to protect their proprietary interests from competitors.

These agreements restricting when, where, or for whom employees can work were once limited to specific individuals: for example, high-level company executives who had access to company trade secrets or workers who developed unique skills while employed by the company. 

Over the past decade, however, companies have started asking rank-and-file employees to sign non-compete agreements.

It’s estimated that one in five American workers today is bound by one of these agreements, restricting their ability to seek competitive wages or pursue their professional goals. 

In some states, like New York, courts are taking steps to limit the power of non-compete agreements and the negative impact they can have on workers and the economy.

What most employees don’t realize is that even though non-compete agreements are legal for employers to issue in New York, many of these agreements can’t be enforced. 

In this post, we’ll lay out what New York law says about non-compete agreements, review some of the tactics that employees can use to invalidate one, and explain how workers can seek support in overcoming their employer’s non-compete agreement. 

Ottinger Employment Lawyers have been assisting executives with non-compete issues since 1999. Submit the short form below to get started with a consultation.

If you have questions about non-compete agreements in New York, our attorney, Robert Ottinger is an expert when it comes to non-compete agreements in New York.

If you would like to get in contact with a New York employment law attorney, contact us today.

What is a Non-Compete Agreement?

In response to the passing of A1278B by the New York State Assembly on June 20, 2023, the state’s labor law now expressly prohibits the enforcement of non-compete agreements among workers. This law marks a significant change, following the Federal Trade Commission’s proposal for a nationwide ban on non-competes.

A non-compete agreement is a clause typically inserted into an employment or separation agreement that prohibits a person from working for a competitor of their employer in a given area and/or for a period of time. It could also be presented to you as a separate contract after you’ve begun working.

A non-compete agreement can limit your ability to move around in your industry, pursue new opportunities, and find competitive wages.

By signing one, you effectively agree that if you stop working for your employer, you will face limited options for finding a new role that uses your skills and experience. 

For example, a consultant who works in New York City might be prohibited from finding a role form a new firm that operates anywhere in Manhattan.

A non-compete agreement could also bar someone from looking for work in their industry from six months to two years after they leave their previous employer.

If you break your end of the contract by taking a job with a competitor, your employer may sue. This can put a significant financial and legal burden on employees and put any potential new job opportunities at risk.

How to Evaluate New York Non-Compete Agreements

In New York, courts disfavor non-compete agreements and enforce them only when necessary.  Here are the main factors courts consider:

• non competes are enforced only when necessary to protect legitimate business interests such as trade secrets or special skills acquired during employment
• non compete agreements must be reasonable in time and geographic reach
• the agreement cannot be harmful to the general public
• the agreement must not be unreasonably burdensome on the employee.

Courts apply the same standard to non-solicitation agreements.

The good news is that in New York, non-compete agreements are widely misunderstood. New York non-competition law attempts to strike a balance to protect an employer’s legitimate business interests, an employee’s ability to earn a living, and the public interest in free trade.

In New York, courts largely disfavor non-compete agreements and enforce them only when necessary. They consider four factors when determining whether to enforce an agreement:

• If the agreement protects legitimate business interests, e.g. trade secrets or special skills acquired during employment
• If it’s reasonable in time and geographic reach
• If it’s not harmful to the general public
• If it’s not unreasonably burdensome on the employee

In New York, the courts apply the same standard to non-solicitation agreements. These four criteria place a high bar for non-compete agreements — one that many of them can’t meet.

They also give employees a number of arguments that can be used to fight their existing non-compete agreements in court. If a non-compete agreement doesn’t meet one of these criteria, then it can be rendered invalid by a judge. 

5 Ways to Defeat a New York Non-Compete Agreement

Workers in New York have successfully used a number of tactics to prove that their employers’ non-compete agreements are unenforceable.

Here are some of the arguments that most commonly help invalidate these agreements in court.

1. Fired Without Cause

If your employer is not willing to employ you, courts generally will not enforce a non-compete agreement. This is almost black letter law in New York, so if you were fired without cause, your non-compete agreement is not enforceable.

2. The Legitimate Business Interests Test

An employer cannot enforce a non-compete agreement against an employee unless it can demonstrate a legitimate interest that needs to be protected. In most cases, the only legitimate interest that justifies the enforcement of a non-compete clause is a trade secret.

This means that your non-compete agreement will not be enforced unless your company has trade secrets, and you know about them.

Fortunately, very few people have actual knowledge of a company’s trade secrets, which makes many non-compete agreements unenforceable. Courts don’t want to lock talented employees out of their fields unless there is a very good reason to do so.

3. Unclean Hands

A non-compete agreement is a legal contract. But your employer cannot legally enforce an agreement that it breached itself.

Your non-compete is probably part of your employment agreement. Has your employer violated any of its promises?  

• Have they paid you everything they promised to pay such as bonuses, commissions, incentives, wages, etc.? 
• Have they provided all benefits promised in the agreement?  
• Have they broken any employment laws?

Read through your employment contract carefully to determine if your employer has breached any terms, which could be grounds for invalidating the agreement.

4. The Janitor Rule

The Janitor Rule is a tool used by courts to void non-compete agreements that are so broad that they’d prevent an employee from working with a competitor even in an unrelated role, e.g. as a janitor.

For example, a speech therapist in a 2016 case (Reading & Language Learning Center v. Sturgill) was prohibited from working with “any current client” for two years.

Because the agreement technically barred the therapist from working in any capacity, a court threw it out for being too broad. 

If you are facing a non-compete issue, take a look at your agreement. Does it narrowly tailor the restrictions, so it relates directly to your position with the company? Or does it prevent you from working for a competitor in any manner, including working as a janitor?

5. There Is No Competition

A non-compete agreement cannot be enforced unless your employer proves that you are competing. Compare the product or service of your new employer with your prior employer.  

• Do they compete?  
• Is your new employer offering the exact same services or products as your prior employer?  
• Do they serve the same needs?  
• Are they in the same markets?

If not, it’s arguable that the agreement isn’t valid.

New York Non-Compete Agreements Review & Consultation

Non-compete agreements can undermine your future career prospects. It’s critical that you carefully review and consider the long-term implications of these agreements before you sign one.

If you are contemplating entering into a non-compete agreement or fighting enforcement of an agreement, having the support of experienced employment attorneys is essential. 

Ottinger Employment Lawyers has drafted, reviewed, and negotiated non-compete agreements in New York for over 20 years. We offer a non-compete review and consultation to help you understand your options.

Get in touch today to speak with someone about the details of your case and how we can help you with your non-compete agreement.

Robert Ottinger, Esq.

Robert Ottinger is an employment attorney who focuses on representing executives and employees in employment disputes. Before starting his firm, Robert slugged it out in courtrooms trying cases for the government. Robert served as a Deputy Attorney General for the California Department of Justice in Los Angeles and then as Assistant Attorney General for the New York Attorney General’s Office in Manhattan.

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