Non-Compete Agreements in New York
Are non-compete agreements enforceable in New York?
Non-compete agreements are enforceable in New York if they meet a strict reasonableness test. The agreement must be reasonable in time, geographic area, and scope—protecting only the employer's legitimate interests (trade secrets, customer relationships, goodwill) without unduly burdening the employee's ability to work. Unlike some states, New York does not ban non-competes outright. Courts may partially enforce an overbroad covenant, narrowing the terms rather than voiding it entirely. Recent federal action (the FTC's non-compete rule was vacated in August 2024) does not change New York law. Understanding what makes a non-compete reasonable and whether yours meets the test is essential.
The Reasonableness Test: Time, Geography, and Scope
New York courts use the "BDO Seidman" test to evaluate non-competes. An agreement is enforceable if it is: (1) reasonable in time, (2) reasonable in geographic area, (3) reasonable in scope of restricted activities, (4) no broader than necessary to protect the employer's legitimate interests, and (5) not unduly burdensome to the employee.
Reasonable time is typically one to two years for most positions, though it can be longer in limited circumstances (e.g., senior executive with access to significant trade secrets). Geographic reasonableness depends on the employer's actual business territory. Scope means the restriction cannot extend to all commercial activity—it must be limited to the employer's field or customer base.
Legitimate Business Interests
An employer must have a legitimate reason for the non-compete. Common legitimate interests include protecting trade secrets, customer relationships (preventing the employee from soliciting the employer's clients), confidential business information, and goodwill. A non-compete cannot exist simply to eliminate competition or prevent an employee from working in their field.
If the restriction goes far beyond protecting these interests—for example, prohibiting work in an entire industry or city when the employer operates in a small niche—it fails the test. The restriction must be tailored to the specific threat the employer faces.
When Non-Competes Are Overbroad
A non-compete is overbroad if it is unreasonable in time, geography, scope, or if it goes beyond protecting legitimate interests. For example, a restriction barring an employee from any employment in the entire county for five years would likely be unenforceable. A ban on working for any competitor in a specialized field might also be overbroad.
Courts in New York can use "blue pencilling"—partially enforcing an overbroad covenant and narrowing the terms to make it reasonable. Instead of striking the entire clause, the court may modify the time period, geography, or scope. This means a poorly drafted non-compete can still harm you, even if it would not fully withstand scrutiny.
Recent Legislative History and Current Status
In December 2023, a bill to ban non-competes for most employees in New York was passed by the legislature but vetoed by Governor Hochul. That ban did not take effect. As of now, New York law enforces reasonable non-competes under the BDO Seidman test.
In August 2024, the Federal Trade Commission issued a rule to ban non-competes. However, that rule was vacated (struck down) in federal court and does not apply. Federal law does not currently ban non-competes, and New York law remains in effect. Non-competes are still enforceable in New York if they meet the reasonableness test.
Enforceability in Practice: Injunctions and Damages
If an employer sues to enforce a non-compete, they typically seek a preliminary injunction—a court order stopping you from working for a competitor or soliciting customers while the case proceeds. These injunctions are powerful: they can force you to sit out months or years. If you lose the full case, you may also owe damages.
Whether you get an injunction depends on whether the employer can show the non-compete is reasonable and that they will suffer irreparable harm (harm that money cannot fix, like loss of customer relationships). If your non-compete is clearly overbroad, you have a better chance of defeating an injunction.
When it is worth a call
- You signed a non-compete when hired and want to know if it is enforceable before pursuing a new job with a competitor.
- Your employer is threatening to sue you for breach of a non-compete agreement, or has filed a lawsuit.
- You believe the non-compete is overbroad (too long, too large a geographic area, or too restrictive in what work is prohibited) and want to challenge it.
Common questions
- If a non-compete is too broad, will a New York court strike it completely or try to narrow it?
- New York courts will apply blue pencilling—they may narrow the non-compete to make it reasonable rather than striking it entirely. This means an overbroad clause can still be enforced in a narrower form. However, not all courts narrow equally. If the clause is egregiously overbroad, a court might refuse to modify it. The safest approach is to challenge any non-compete that seems unreasonable.
- Is there a "rule of thumb" for what time periods and geographic areas New York courts consider reasonable?
- Courts generally look favorably on one to two years for most positions and a geographic area matching the employer's actual business. However, there is no bright-line rule. A three-year restriction might be reasonable for a senior executive with unique trade secrets; a six-month restriction for an entry-level employee might still be overbroad if it covers a huge geographic area. The context matters.
- I signed a non-compete but the employer laid me off. Can they still enforce it?
- This is unsettled in New York. Some courts have held that laying off an employee undermines the employer's basis for enforcement, particularly if the restriction was in the original employment agreement. However, courts have also enforced non-competes after layoff. The outcome depends on the specific facts and the court. If you are laid off, consult a lawyer about whether the non-compete is likely to be enforced.
- What happened to the non-compete ban bill that was introduced in New York?
- The bill passed the New York legislature in 2023 but was vetoed by Governor Hochul in December 2023. It did not take effect. The federal FTC rule to ban non-competes was also vacated in August 2024. Currently, New York law enforces reasonable non-competes under the BDO Seidman test. There is no ban.
Talk it through with Mitch
Bring the situation, not a diagnosis. A short conversation usually makes the next step obvious.