New York’s Non-Compete Laws: What Employers Need to Know

New York employers have long used non-compete agreements to protect themselves, but it is essential to understand when an agreement complies with strict New York laws. The legal landscape for these agreements keeps shifting. At times, it seems they will be banned altogether, while in others they simply get more limited. Knowing what you can do and not do is critical to maintaining compliance and protecting your legitimate business interests.

The attorneys at Daniels, Porco & Lusardi, LLP help you understand New York’s non-compete laws and what you can do to utilize them correctly.        

New York’s Current Legal Standard for Non‑Competes

New York still permits non-competes for now. While there have attempts to ban them outright, that has not happened yet. But they are only enforceable when they meet very strict standards. Courts in New York utilize a reasonableness test that looks at whether the non-compete:

• Protects a legitimate business interest
• Is no broader than necessary in time, geography, and scope
• Does not impose undue hardship on the employee
• Does not harm the public interest

Courts look at these factors on a case-by-case basis.

What Counts as a Legitimate Business Interest?

New York recognizes only a few interests that justify a non‑compete:

• Protection of trade secrets or confidential information
• Protection of client relationships developed at the employer’s expense
• Preventing unfair competition by employees with unique or extraordinary services
• Safeguarding significant investments in specialized training

General concerns like avoiding competition or preventing turnover are generally not enough.

Reasonable Time, Geography, and Scope

Even when a legitimate interest exists, the restriction must be narrowly tailored.

Time Limits

Most enforceable non‑competes in New York fall between 6 and 12 months. Longer periods are rarely upheld unless the employee had access to highly sensitive information.

Geographic Limits

Restrictions must match the employer’s actual market. A nationwide or statewide ban is enforceable only if the employer truly operates at that scale.

Scope of Activities

The restriction must target the specific competitive activities that pose a risk, not the entire industry. Overly broad “any role for any competitor” clauses are frequently struck down. Courts may also more strictly limit non-competes against physicians and others in the medical field.

Non‑Competes for Low‑Wage or Non‑Managerial Workers

New York courts are increasingly skeptical of non‑competes for:

• Hourly workers
• Entry‑level employees
• Employees without access to confidential information
• Workers who do not manage client relationships

In many cases, courts refuse to enforce non‑competes against these categories altogether. Employers may instead be able to use other contractual clauses, such a non-solicitation or confidentiality clauses, to protect their interests.

The Push Toward a Statewide Ban

New York’s legislature has repeatedly advanced bills that would ban most non‑compete agreements statewide, with limited exceptions. Although this has not yet occurred, there will likely be future attempts to do so.

Employers should expect:

• Continued legislative activity
• Increased public and regulatory scrutiny
• A trend toward narrower, more defensible restrictive covenants

Even without a statutory ban, courts are already applying a more employee‑friendly approach.

Interaction with Federal Trends

The Federal Trade Commission (FTC) has also targeted non‑competes, proposing rules that would prohibit them in most employment relationships. While litigation over federal authority continues, employers should anticipate a future in which non‑competes are harder to enforce at both the state and federal levels.

Alternatives to Non‑Competes

Because non‑competes face growing challenges, New York employers increasingly rely on other restrictive covenants that are more likely to be enforced:

• Non‑solicitation of clients
• Non‑solicitation of employees
• Confidentiality and trade secret protections
• Invention assignment agreements
• Garden‑leave provisions(paid notice periods)

These tools protect business interests without imposing the same level of hardship on employees.

Best Practices for New York Employers

To reduce risk and improve enforceability, employers should:

• Use non‑competes only for employees with genuine access to sensitive information
• Tailor restrictions to the employee’s actual role and market
• Avoid one‑size‑fits‑all templates
• Pair non‑competes with strong confidentiality and non‑solicitation clauses
• Review agreements annually to ensure they reflect current law
• Document the legitimate business interest supporting each restriction

Employers should also ensure that non‑competes are presented before employment begins or at the time of a meaningful promotion, not sprung on employees after the fact.

Use Non-Compete Agreements the Right Way in New York

Employers who wish to utilize non-compete agreements must comply with strict New York laws in doing so. Knowing how to avoid common pitfalls or mistakes can help you avoid liability and ineffective agreements.

The attorneys at Daniels, Porco & Lusardi, LLP are ready to help. Contact us today for a consultation.