New York non-compete agreements are widely misunderstood and many of them are unenforceable. This is because New York strongly disfavors non-compete agreements and courts will not enforce them unless a company can overcome a presumption of unenforceability.

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.SPEAK WITH AN EMPLOYMENT ATTORNEY ABOUT YOUR NON-COMPETE AGREEMENT

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Locked into a Non-Compete in NY? Here are Five Ways Your Can Potentially Defeat Your New York Non-Compete Agreement

  • Are you bound by a New York non-compete agreement?  
  • Are you trying to move from one employer to another in the same industry?  
  • A non-compete agreement can ruin your plans.  
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This article provides a brief overview of tactics that can beat a non-compete agreement.  For a more in-depth discussion of this topic, see New York Non-Compete Agreements: The Ultimate Guide for Executives.  If a non-compete agreement is causing problems for you, it may be possible to invalidate it or reduce its impact.  We offer a non-compete review & consultation to help you understand your options. Schedule today to get started!

First, a little background on New York non-compete agreements.  These agreements were once limited to high-level company executives who had access to company trade secrets or 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.  

As a result, employees at all levels find themselves constrained by these agreements.  It’s estimated that one in five people today are bound by a non-compete clause.  The overuse and abuse of non-compete agreements are also creating a backlash against them.   Last year, New York Attorney General Eric Schneiderman prosecuted three companies for abusing non-compete agreements.   

According to the Attorney General, “unless an individual has highly unique skills or access to trade secrets, non-compete clauses have no place in a worker’s employment contract.”  The tide has turned against non-compete agreements in New York.  Courts are now more likely than ever to void these agreements.

What is a Non-Compete Agreement?

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 for a period of time.   A non-compete agreement can limit your ability to move around in your industry.  By signing one, you effectively agree that if you stop working for your employer, you will leave your industry and abandon your skills and experience for a period of time that typically ranges from six months to two years.  Here is a typical non-compete agreement:

“Employee shall not, whether directly or indirectly, alone or as a partner, joint venturer, officer, director, employee, consultant, agent, independent contractor or stockholder of any company or business anywhere in the United States, except on behalf of the Company or with the company’s written consent:

(a) engage in the Business of the Company or in any business that is in competition with the Business of the Company;

(b) be employed by, consult for or provide any services to any person or entity that is engaged in the Business of the Company or is engaged in any business that is in competition with the Business of the Company;

(c) solicit or accept the same or substantially related business of any customer or account of the Company or induce any customer or account of the Company to cease doing business with the Company or in any manner interfere with the goodwill and customer relationships of the Company.”

The Legal Standard used 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.

5 Ways to Defeat a New York Non-Compete

1. Fired without Cause

New York Courts will not enforce a non-compete agreement against an employee who was 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 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. Very few people have actual knowledge of a companies trade secrets.

Most companies cannot satisfy the legitimate interests test and this renders the non-compete agreement unenforceable. Unless you have detailed knowledge of your companies trade secrets, your non-compete agreement is probably unenforceable.

3. Unclean Hands

Your employer cannot 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 changed your position?  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 your agreement closely and try to find a breach.   Judges do not like enforcing non-compete agreements and if your employer did anything wrong then they might have no chance of enforcing that agreement against you.

4. Report Your Employer to the Attorney General for Non-Compete Abuse

The New York Attorney General’s Office has prosecuted employers who abuse non-compete agreements.  See this article in Fortune.  The only legitimate use of a non-compete agreement in New York is to protect trade secrets or highly unique skills acquired while employed.   

If you don’t fall into that category, then you should not be bound by a non-compete agreement and your employer could be prosecuted for trying to restrict your ability to move to another employer.   

A New York employer today risks prosecution from the Attorney General if it tries to enforce a non-compete agreement unless genuine trade secrets or highly unique skills are at issue.  New York employees now have more protection from abuse by overreaching employers.

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?    Be prepared to demonstrate that your new employer provides different products or services or is in a different market than your prior employer.