New York Non-Compete Lawyers: How to Know if a Non-Compete Agreement Can be Enforced
Non-compete agreements limit employee mobility, stifle wage growth and innovation, and prevent true competition.
An estimated 40 percent of American workers have been subject to a non-compete agreement at some point in their careers.
Given the growing use of these agreements in today’s workforce, especially with employees in low-paying jobs, state and federal lawmakers are taking notice — and action.
In 2016, New York Attorney General Eric Schneiderman prosecuted three companies for abusing non-compete agreements.
And, in January 2023, the Federal Trade Commission proposed a new rule that would ban these agreements nationally.
As awareness grows of the harm that non-competes cause, courts in New York are now more likely than ever to void these agreements when they’re challenged.
Let’s break down what non-compete agreements are, look at what U.S. law says about them, and explain how workers in New York can take action to get out from under their restrictions.
If you have any questions, or if you would like to speak with a New York non-compete agreement attorney, please contact the team at Ottinger Employment Lawyers today.
What Are Non-Compete Agreements?
A non-compete agreement is a contract that restricts the right of an executive or employee to engage in a competitive business relationship with their employer.
They 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.
For instance, a company that sells copy machines in Manhattan might require its employees to sign an agreement saying that they won’t work for another copy machine retailer in New York City for at least a year after they leave their previous jobs.
Depending on the business, the restrictions that a non-compete agreement has on the timing and location of future employment can vary.
Usually, workers are limited from finding a new job from six months to a year after their departure. But in industries where highly technical research and development is involved — such as pharmaceuticals or tech — some clauses can last for multiple years.
Non-compete agreements are intended to help companies protect their intellectual property and commercial interests.
Unfortunately, businesses today often exploit them to gain an edge on competitors at their workers’ expense.
Companies are increasingly pushing non-competes on workers where there’s no legitimate cause, such as executives without access to legally protected information, rank-and-file employees, and even low-wage workers.
Violating a non-compete agreement can have serious consequences for employees in New York. If you ignore the terms of the contract and go to work with a competitor, your former employer has grounds for a lawsuit.
If a court decides to enforce the non-compete agreement, you could be at risk of losing your new job, as well as paying financial penalties.
What Does New York Law Say About Non-Compete Agreements?
However, there is some good news for New York employees: a significant number of employer non-compete agreements don’t meet the state’s legal criteria for enforcement.
Because companies have exploited the power these agreements give them over workers, New York law requires that employer non-compete agreements meet certain criteria to be enforceable in the state.
First, a non-compete agreement has to be necessary to protect an employer’s legitimate business interests.
This could include protecting an employer’s trade secrets and confidential information from being leaked, or preventing employees from taking highly specialized skills they gained on the job to a competitor.
But New York law also says that a valid non-compete agreement must also not impose “undue hardship” on an employee. There’s no strict legal rule defining what constitutes an “undue hardship.”
It depends on a combination of factors, including the type of business, an employee’s resources, and the extent of the non-compete agreement’s restrictions.
Thirdly, non-compete agreements can’t be unlimited: the constraints it puts on employees must be reasonable in the time period and geographic scope, depending on the business and industry.
Finally, a non-compete agreement can’t harm the public with its restrictions in any way, such as by preventing communities access to lifesaving medical services.
If a non-compete agreement in New York fails to meet all four of those criteria, it’s not likely that a court would force an employee to comply with it. Legally, the agreement would be deemed “unenforceable.”
In 2016, the New York Attorney General’s Office declared war on the abuse of overly broad and unenforceable non-compete agreements, condemning the negative impact they have on workers and the economy.
Rampant overuse of non-compete agreements — especially for low-waged and low-skilled employees — restricts worker mobility, contributes to wage stagnation, and limits growth and innovation across industries.
Is A National Ban On Non-Compete Agreements Possible?
Growing awareness about the harm that non-compete agreements have on workers and the economy has gotten the attention of Congress.
A bipartisan effort to regulate non-compete agreements on a federal level was introduced in the U.S. Senate in October 2019 by Senators Chris Murphy (D-Conn.) and Todd Young (R-Ind.).
Senate Bill 2614, the Workforce Mobility Act (WMA), proposes a near federal ban of all employee non-compete agreements, with limited exceptions for certain business transactions.
According to the bill, non-compete agreements could only be allowed in the following cases:
- In connection with the sale of a business
- As part of the dissolution of a business partnership
- As part of a buyout of a person’s partnership interest in a business
- As part of a severance agreement with senior executives as part of the sale of a business (but the agreement is limited to 12 months and the employee must receive 12 months’ severance pay)
Although the WMA does not expressly prohibit non-solicitation agreements or non-disclosure agreements, the bill leaves open the possibility that these agreements may also be restricted if they place limits on a worker’s job mobility. The bill also doesn’t prohibit agreements that prevent employees from sharing legitimate trade secrets.
A prohibition on non-compete agreements would force companies to find a new way to protect their company’s legitimate interests without impeding a person’s ability to change jobs and earn higher wages.
Passage of the WMA would also provide a uniform standard, which would ease the current discrepancies between states.
How a New York Employment Lawyer Can Help Void a Non-Compete Agreement
New York state law doesn’t currently have a blanket ban on non-compete agreements. But because they often impose needless burdens on workers, these agreements are disfavored under New York law.
Even though many employers still pressure their employees to sign these agreements, there’s a good chance that they’re not technically enforceable. This means that they likely won’t hold up if challenged in court.
Understanding the places where employers often go wrong when preparing these agreements can help you attack one and have it rendered invalid in court.
Here are some of the most frequently successful arguments to make against a non-compete agreement:
- The Restrictions Don’t Serve a Legitimate Business Interest: An employer must demonstrate that the non-compete agreement is needed to protect a legitimate business interest. In most cases, the only legitimate interest that justifies the enforcement of a non-compete clause is a trade secret. Fortunately, very few people have actual knowledge of a company’s trade secrets, which makes many non-compete agreements unenforceable.
- The Restrictions Place an Undue Burden on You: New York law requires non-compete agreements not make it unreasonably challenging for an employee to make a living. If the terms of the agreement make it almost impossible for someone with your skills to find a new job, you might be able to void the agreement. But be aware: the inability to make the same wages or work the same exact job isn’t always an undue hardship.
- 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. 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?
- The Company Breached the Agreement: A company can’t enforce a contract that it has already breached. Take a look at your employment contract: Have they paid you all bonuses, commissions, and wages as promised? Have they failed to provide any agreed upon benefits? Have they broken any employment laws? If your employer has breached any part of its employment agreement, then you can stop them in their tracks if they try to enforce the non-compete clause of the same agreement.
- The Non-Compete Period is Too Long: How long does a non-compete last? Some non-compete agreements try to restrict executives for two years or more. Most courts will not enforce a non-compete period that is over a year. In some cases, courts will simply modify the agreement by reducing the non-compete period.
- A Change in Circumstances: If your position has materially changed since you signed your non-compete agreement, then it might not be enforceable. For example, if you were promoted to a higher level and have increased responsibilities and duties, then the prior agreement is out of date and unenforceable.
- The Geographic Area of Restriction is Too Broad: This argument applies if the non-compete covers a geographic area that exceeds the reach of the business. If a company only operates in Queens, it cannot prevent its employees from working in Manhattan.
- Your Skills Are Necessary to Protect Public Health: If the job you perform helps the public in a significant way (e.g., healthcare, environmental protection, etc.) and there aren’t many people in your area who can do your job, non-compete agreement terms that prevent you from working might create unenforceable harm to the public.
Identifying the weak points in your non-compete agreement is best done with the guidance of an experienced attorney.
An employment lawyer can review your non-compete agreement, determine whether it’s enforceable under New York law, and advise you on the best course of action for challenging it.
Get in Contact With a New York Non-Compete Agreement Lawyer Today
The team at Ottinger Employment Lawyers has been helping employees fight New York non-compete agreements since 1999. Our consultation process for non-compete agreements has two parts.
First, an attorney will review your current agreement and determine what resolutions may be possible. Next, an attorney will meet with you, either in person or over the phone, and explain to you what options you may have to resolve your agreement.
And if you decide to go to court, our lawyers can also ensure you’re getting the best representation for your case.
If your future is on hold due to a New York non-compete agreement, get in touch with Ottinger Employment Lawyers today.