Non-Compete Agreements in New York: A Complete Guide

New York has historically enforced non-compete agreements, but the landscape is shifting. A proposed ban was vetoed in 2023, but momentum for reform continues. Understanding the current rules and potential changes is essential for anyone working in New York.

Current New York Non-Compete Standards

New York courts use a strict reasonableness test to evaluate non-competes. Under current law, a non-compete will be enforced only if it:

1. Is necessary to protect legitimate employer interests
2. Does not impose undue hardship on the employee
3. Does not harm the public interest
4. Is reasonable in time, geography, and scope

What Counts as a Legitimate Business Interest?

New York courts have recognized these as legitimate interests worth protecting:

• Trade secrets and confidential information
• Unique or extraordinary services of the employee
• Client relationships developed with substantial employer investment

Important: New York courts have held that protecting against ordinary competition is NOT a legitimate interest. The employer must show something beyond just wanting to prevent competition.

The "Unique Services" Standard

One of New York's distinctive features is its "unique services" doctrine. For employees who don't have access to trade secrets, courts ask whether they provided "unique or extraordinary" services. This is a high bar:

• General sales skills typically don't qualify
• Specialized expertise developed at significant employer expense may qualify
• High-level executives with irreplaceable relationships may qualify
• Most rank-and-file employees do not meet this standard

Reasonableness Analysis

Time Period

• 6 months to 1 year: Generally reasonable
• 2 years: May be reasonable for senior employees
• 3+ years: Difficult to enforce

Geographic Scope

• Must be limited to areas where the employee actually worked
• Or where the employer has legitimate business presence
• Worldwide or nationwide restrictions face heavy scrutiny

Scope of Prohibited Activity

• Must be tailored to the employee's actual role
• Cannot prevent employment in entirely different capacities
• Overbroad restrictions may void the entire agreement

New York's "Blue Pencil" Doctrine

Unlike Texas, New York courts traditionally applied a "blue pencil" rule that only allows them to sever completely distinct provisions—not rewrite overbroad terms. This means:

• An unreasonable restriction may void the entire non-compete
• Courts are reluctant to reform partially reasonable clauses
• This gives employees more leverage to challenge overbroad agreements

However, recent cases suggest New York courts may be moving toward partial enforcement in some circumstances.

The 2023 Ban Attempt and Future Legislation

In December 2023, Governor Hochul vetoed legislation that would have banned most non-compete agreements in New York. Key aspects of the vetoed bill:

• Would have prohibited non-competes for most workers
• Included a private right of action for employees
• Provided for liquidated damages and attorney's fees

Despite the veto, the Governor expressed openness to more targeted legislation. Future bills may:

• Ban non-competes below certain income thresholds
• Require additional consideration for non-competes
• Mandate specific notice and disclosure requirements

Industry-Specific Rules

Broadcast Industry

New York Labor Law Section 202-k prohibits non-competes for broadcast employees.

Legal Profession

Attorney non-competes are generally unenforceable under professional conduct rules.

Financial Services

Wall Street has a long history of enforcing non-competes, particularly for senior personnel with client relationships. Garden leave provisions are common.

Garden Leave Provisions

New York employers often use "garden leave" arrangements instead of or alongside non-competes:

• Employee must give extended notice (often 60-90 days)
• Employee is paid during the notice period
• Employee may be required not to work during this time
• Courts generally view these more favorably than unpaid non-competes

Practical Guidance for New York Workers

Negotiating a Non-Compete:

• Push for shorter duration (6-12 months maximum)
• Request specific geographic limitations
• Define "competitor" narrowly and specifically
• Ask for garden leave (continued pay) during any restricted period
• Request a carve-out for being terminated without cause

Challenging an Existing Non-Compete:

• Assess whether you had access to true trade secrets
• Consider whether your services were truly "unique"
• Examine whether the restrictions are narrowly tailored
• Evaluate if the employer can show legitimate business interests

Conclusion

New York's non-compete law remains in flux. While current law allows enforcement of reasonable agreements, the clear trend is toward greater employee protection. Agreements that might have been enforceable years ago face increasing skepticism from courts, and legislative changes could further restrict enforceability in coming years.