What You Need to Know About Non-Compete Clauses in New York
Any informed business executive in New York should be aware of the importance of non-compete clauses (NCC’s)3 min read
Any informed business executive in New York should be aware of the importance of non-compete clauses (NCC’s). These legal documents allow for employers to protect themselves from employees who might expose trade secrets, gain a competitive edge over their current employer, and/or disclose confidential information. Depending on the complexity of the situation, understanding the law, and whether or not an NCC is enforceable in the state of New York, can be tricky. It is important for any executive to understand the legal judgment that affects NCC’s, and how they must legally be drafted and enforced, as it is a key part of protecting a business’s confidentiality and trade secrets.
As opposed to a non-disclosure agreement (NDA), an NCC is drafted to protect a business from activities that could potentially harm them in the form of competition. Passive activities, such as disclosing confidential information, is considered unethical. An NCC, however, is typically used when an employee is leaving a company altogether and/or is moving to a company that is considered a competitor. An NCC describes how the former or existing employee is not allowed to solicit customers, use the former company’s trade secrets, or reveal confidential information to the new employer, thereby protecting the prior company from harm.
When writing or enforcing a NCC, there are certain nuances that must be taken into consideration. As the language and scope of the agreement should be tailored to each situation, legal advice is often necessary to ensure that an employer is protected from potential harm. In New York, for example, non-compete clauses must be reasonable in their scope in order to be enforceable.
When determining reasonableness, courts consider the duration of the clause, the geographic restriction of where a person is restrained from working, and whether the clause is necessary for the protect of confidential information or trade secrets. An unreasonable non-compete may be enforced only in part or not at all. Additionally, an employer must have a legitimate interest in what is being protected, and the clause cannot be overly broad.
Non-compete clauses must also consider certain exceptions. For instance, employees can often work for a competitor in another geographic area, or outside the scope of their former company’s business, as long as they are not divulging confidential information. Because of this, NCC’s in New York must be constructed so that any exceptions are explicitly laid out in writing.
Non-compete agreements are also subject to ongoing scrutiny in New York. If the agreement is meant to protect an employer's interests in perpetuity, it is likely to be voided by the courts. This is because employers are not allowed to unreasonably limit an employee’s future career opportunities.
Depending on the amount of risk and the amount of investment in confidential information, non-compete agreements can provide the necessary protection for a business in New York. However, proper preparation and understanding of the law is necessary for an NCC to withstand legal scrutiny. Failure to account for the nuances of the law can result in an NCC being deemed unenforceable.
It is important to consult with experienced business attorneys that understand the complexities and nuances of local regulation around non-compete clauses in order to protect yourself and your business from potential harm. The experienced UpCounsel legal community can assist executives in finding the legal counsel they need to protect their business in the New York area, and draft an NCC that is both reasonable and enforceable.
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