Jurisdiction: New York
Employee Non-Compete Agreement (NY)
Employee Non-Compete Agreement (NY) Preparation Form – We recommend that you gather the information in this form prior to accessing the online questionnaire. Doing so will help you efficiently create your custom New York Employee Non-Compete Agreement.
This New York Employee Non-Compete Agreement (also known as a non-compete agreement or non-compete) is intended for use by a company or other employer to limit certain competitive activities of an employee when the employment relationship ends. Employees or businesses located in New York should use this agreement because this agreement is based on New York law.
New York courts generally disfavor non-competes because they act as restrictive covenants that might limit an individual’s ability to earn a living. Thus, employers seeking to bind employees to non-competes must consider the possible legal challenges to enforcement in drafting the agreements. The employer should carefully tailor a non-compete to account for the various issues that may affect enforceability, such as whether the non-compete:
- Is supported by adequate consideration.
- Identifies a legitimate business interest worthy of protection.
- Meets the standards for reasonableness under state law, including that it:
- is of a reasonable duration;
- defines prohibited competitive activity to include only activity necessary to protect the legitimate business interests identified (commonly referred to as “protectable interests” by New York courts and practitioners);
- places a reasonable limitation on the agreement’s geographic scope or business parameters.
- does not impose undue hardship on the employee; and
- does not cause injury to the public.
- Includes provisions that supplement the restrictions on unfair or unlawful competition with additional limitations restricting:
- the solicitation of the employer’s employees, customers, or clients; or
- the use or disclosure of confidential information.
Special Rules for Attorneys, Financial Service Professionals, and the Broadcasting Industry
- Attorneys. New York law prohibits attorneys from entering into agreements that restrict their right to practice law at the termination of an employment relationship unless the agreement is part of a retirement benefit agreement.
- Financial Service Professionals. In addition, a non-compete agreement binding a financial services employee leaving one Financial Industry Regulatory Authority (FINRA) member firm to join another is not enforceable if enforcement could prevent a customer from continuing to use the services of that employee as its registered representative. FINRA registered agents also must aid in the transfer of a customer’s account if the customer chooses to follow a registered representative to another broker.
- Broadcasting Industry. Section 202-k of the New York Labor Law governs non-compete agreements for employees in the broadcasting industry. A broadcasting industry employer cannot require as a condition of employment, whether in an employment contract or otherwise, that a broadcast employee or prospective broadcast employee enter into a post-employment non-compete agreement prohibiting the employee from working either:
- In a specific geographic area.
- For a specific period of time.
- With a particular employer or industry.
However, a non-compete provision will be enforced if the provision only covers the contract term. This law does not cover management employees. Violators are liable for an aggrieved party’s damages, attorneys’ fees, and costs.
Limitations of Non-Competes
Employers should understand what non-competes can and cannot accomplish. For example, non-competes can help protect against unfair or unlawful competition by former employees. However, non-competes cannot eliminate all forms of competitive activity.
New York law disfavors non-compete agreements so employers should take additional precautions to protect their valuable resources.
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