Top 5 Things to Consider with Non-Compete Agreements in New York
The Legal Process of Employee Agreements: Crucial for Business Success3 min read
As business owners well know, the legal process of entering into agreements with employees is a crucial step in successfully managing a company. A key factor in any employee agreement is the inclusion of a non-compete agreement, which ensures that confidential information and goodwill are protected after the employee leaves. In particular, for businesses operating in the state of New York, it is important to be aware of the various nuances of the state’s laws regarding non-competes.
As a business owner in New York, there are five key considerations you should keep in mind when crafting and executing a non-compete agreement: (i) what terms to include; (ii) Avoiding a blanket prohibition; (iii) State law; (iv) Length of duration; and (v) Fairness and reasonableness.
I. What Terms to Include in the Agreement
When establishing a non-compete agreement, it is essential to make sure the agreement fully states the restrictions that will be in place for the employee. These restrictions should be specific to the business’s needs and typically include sections related to use of confidential information, competition with respect to the business’s services or products, solicitation of clients and customers, and other related competitive activities. The terms should also be specific as to the length of time and geographic area in which the employee must abide by the restrictions.
II. Avoiding a Blanket Prohibition
When drafting the terms, it is important to note that courts in New York are generally reluctant to enforce overly broad restrictions that can lead to a “blanket prohibition” of activity. As such, the terms should be tailored to the specific activities needed to be protected by the employer. For example, if an employee’s role does not require them to work with confidential information, then the agreement should not include a blanket prohibition on the employee from engaging in competitive activities.
III. Understanding the State Law
It is important to be aware of the state law and the requirements it imposes before a non-compete agreement is valid. The New York state courts regularly enforce non-compete agreements as long as the agreement is reasonable in both duration and geographic scope, and the agreement serves to protect the employer’s legitimate business interests.
IV. Length of Duration
A non-compete agreement in New York is typically limited to one year in duration, although agreements of shorter durations are generally enforced. It is important to note that courts in New York usually do not impose restraints that are deemed longer than reasonably necessary to protect the employer’s interests.
V. Fairness and Reasonableness
The courts in New York evaluate the fairness and reasonableness of each non-compete agreement on a case-by-case basis. As such, the best approach to ensure that a non-compete agreement meets the requirements of the state law is to make sure the agreement contains specific terms that are tailored to the employer’s needs, are reasonable in duration and geographic scope, and are in no way unreasonably restrictive to the employee.
For businesses operating in New York, it is important to keep in mind these five essential considerations when drafting and executing a non-compete agreement. Doing so will ensure that the agreement is legally enforceable and will remain in compliance with state law. If you need further guidance navigating the complexities of non-compete agreements in New York, there is legal counsel available through UpCounsel. UpCounsel provides access to experienced attorneys that can help you ensure that your non-compete agreement conforms to the state law.
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