Is My Non-Compete Agreement Enforceable Under New York law? May 7, 2010

In the wake of the massive layoffs of the last few years, I’ve been asked this question an awful lot. (If you’re looking for a link to what a typical non-compete clause looks like, keep reading).

Fortunately, the Court of Appeals – New York State’s highest court, has written rather extensively on the subject. In my view, here are the most pertinent parts:

“A restraint is reasonable only if it: (1) is no greater than is required for the protection of the legitimate interest of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public … A non-compete agreement must also be reasonably limited temporally and geographically.”

Well, that’s awfully vague, you say. And you’re right.

(For purposes of illustration, here’s some sample non-compete language).

But the Court gave us a clearer insight into the policy considerations that help determine whether a particular non-compete provision will be upheld:

“Undoubtedly judicial disfavor of these covenants is provoked by ‘powerful considerations of public policy which militate against sanctioning the loss of a man’s livelihood’ …

“Indeed, our economy is premised on the competition engendered by the uninhibited flow of services, talent and ideas. Therefore, no restrictions should fetter an employee’s right to apply to his own best advantage the skills and knowledge acquired by the overall experience of his previous employment. This includes those techniques which are but ‘skillful variations of general processes known to the particular trade.’

“Of course, the courts must also recognize the legitimate interest an employer has in safeguarding that which has made his business successful and to protect himself against deliberate surreptitious commercial piracy.”

So where does that leave us?

Here’s the Court’s conclusion:

“Restrictive covenants will be enforceable to the extent necessary to prevent the disclosure or use of trade secrets or confidential customer information.”

Jonathan Cooper is a New York Business Litigation and New York Commercial Litigation Lawyer with a focus on New York breach of contract and New York business fraud claims before the Nassau, Queens, Brooklyn, Bronx, Westchester and Suffolk County courts of New York State. For more information, feel free to contact his Long Island office at 516-791-5700.

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