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When a Non-Compete Agreement is Enforceable Under New York Law

The Biggest Challenge in Determining Whether a New York Court Will - or Won't - Enforce a Non-Compete Agreement

While not terribly gratifying, the truth is that it can be a bit difficult to predict with absolute certainty what a New York court will do when confronted with a non-compete regarding a senior-level, key employee.

The reason is fairly straightforward:

These are usually fact-specific inquiries, which means that each case must be evaluated on its own, and it is rare indeed that a court will use a bright-line test to declare, from the get-go, that a particular non-compete clause is invalid. (At least not in New York, anyway).

The 4 Primary Factors that New York's Courts Will Consider in Evaluating the Enforceability of a Non-Compete Clause

That said, New York State's highest court has set forth four (4) criteria that will determine whether the non-compete (a/k/a "restrictive covenant") is reasonable, and therefore, enforceable:

(1) the restriction does not go beyond that which is needed to protect a "legitimate interest of the employer";

(2) the restriction is not overly broad, and therefore manifestly unfair, to the employee;

(3) the restriction is not "injurious to the public"; and,

(4) the non-compete clause has to be limited - reasonably - both in terms of length of time as well as in geographic scope.

Admittedly, this list isn't exactly a model of clarity - particularly if you're looking to find out whether your (soon to be) former employer's non-compete clause can be enforced against you.

Some Other Factors That New York's Courts Will Consider

Luckily, the Court of Appeals has gone further, and enumerated some of the factors it will consider in deciding whether to enforce a particular non-compete agreement:

"[N]o 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.'
 

On the other hand ...

"[T]he 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."

Doesn't that leave us right back where we started? No; Not exactly.

The Takeaway

Rather, the courts are obliged to enforce a non-compete (a/k/a a "restrictive covenant") so long as it is needed to keep a former employee from breaching his fiduciary duty and wrongfully disclosing the employer's confidential, proprietary information that it expended time, money and effort to develop.


Jonathan Cooper
Non-Compete, Trade Secret and School Negligence Lawyer