Does Compensation Impact the Enforceability of a New York Non-Compete?

It is well known by attorneys and businesses alike that New York courts do not like non-compete agreements. That does not mean, however, that every non-compete clause in New York will be unenforceable. While courts will look to invalidate a non-compete, if it meets certain requirements, it may be upheld. Much of this analysis turns on the reasonableness of the clause. Is it considered reasonable when the former employee receives a large financial payout in exchange for the agreement not to compete? A recent report surrounding Swiss drug company Novartis highlights such a clause.

Novartis recently announced plans to cancel the non-compete agreement that it had worked out with its former chairman. The reason for the changed decision revolves around the multi-million-dollar payout that the former chairman would have received in exchange for his agreement not to compete. The large compensation angered shareholders and ultimately caused Novartis to backtrack. If a similar clause were being analyzed by the courts in New York, would it be upheld? Possibly—depending upon:

• Whether the restriction protects a legitimate interest of the employer.
• Whether the restriction is fair to the employee.
• Whether the restriction is “injurious to the public.”
• Whether the clause is reasonable, limited in both length of time and geographic scope. 

Analyzing the enforceability of a non-compete agreement in New York requires the assistance of a knowledgeable legal professional. To learn more, contact an experienced New York business litigation lawyer today. Call our office at (888) 497-3410 for a free consultation.