Non-Compete Agreements in New York: Are They Enforceable?

Federal law does not establish a uniform national standard for non-compete enforceability; instead, states are permitted to set their own rules under common law and statute. The Federal Trade Commission has proposed a nationwide rule to ban non-competes, but as of 2024 this remains under legal challenge and has not been implemented. The Defend Trade Secrets Act, 18 U.S.C. § 1836, protects trade secrets under federal law and provides a federal cause of action for misappropriation, but this is distinct from enforcing contractual non-competes.

Federal employment law does not preempt state non-compete law. Instead, employers may rely on the Uniform Trade Secrets Act (UTSA), which most states including New York have adopted, to protect confidential business information through injunctive relief and damages. The UTSA provides federal-level protection for trade secrets independent of non-compete clauses. Some federal statutes, such as the Americans with Disabilities Act and Title VII of the Civil Rights Act, prohibit enforcing non-competes in a discriminatory manner, but they do not restrict non-competes generally.

Employers seeking national enforcement of non-competes must comply with the law in each jurisdiction where the employee works or is likely to work. This creates significant complexity for multi-state employers.

New York's non-compete law is codified primarily in General Obligations Law § 5-322 and is one of the strictest regimes in the nation. New York courts have long held that non-competes are restraints on trade and will enforce them only when they satisfy three prongs: (1) the restriction must be reasonable in time, (2) the restriction must be reasonable in geographic area, and (3) the restriction must protect a legitimate business interest of the employer. Unlike some states, New York courts will not reform or blue-pencil an overly broad non-compete agreement; if any provision is unreasonable, the entire clause may be unenforceable.

Under New York law, a legitimate business interest includes: protection of trade secrets, protection of confidential business information, and protection of substantial relationships with prospective or existing customers. Courts have held that "goodwill" alone is insufficient to enforce a non-compete; the employer must demonstrate customer relationships that constitute a protectable business interest. Reasonable duration varies by industry and context but is typically 1 to 2 years for sales and management positions. Geographic scope must be limited to territories where the employer actually conducts business and where the employee had meaningful contact with customers or trade secrets.

As of September 24, 2023, New York amended § 5-322 to add significant employee protections. The law now prohibits employers from enforcing any non-compete against employees earning less than $75,000 per year. For employees earning $75,000 or more, any period during which an employee is restricted from working (including a "garden leave" or notice period) must include compensation of at least 50% of the employee's base salary, or the employer must provide a notice period of the same duration. This means if an employer seeks a 6-month non-compete, the employee must either receive 50% salary for 6 months or the employer must provide a 6-month notice period with full pay.

New York does not recognize "non-solicitation" agreements (prohibiting recruitment of customers or employees) as enforceable under the same strict test, but courts will enforce narrowly tailored non-solicitation clauses if they protect legitimate business interests. Non-disparagement clauses are disfavored.

The New York courts apply strict scrutiny and place the burden on the employer to prove each element of reasonableness by clear and convincing evidence. Compared to federal common law, New York's standard is considerably more restrictive. Many states permit courts to reform overly broad non-competes; New York does not. This makes New York a significantly more employee-friendly jurisdiction for non-compete disputes.

Non-competes are unenforceable against any employee earning less than $75,000 per year, regardless of the agreement's terms. At-will employees are protected from overly broad non-competes; New York courts will not enforce restrictions that are unreasonable in time, geography, or scope even if the employee signed the agreement. Non-competes that restrict an employee's ability to earn a livelihood are disfavored and will not be enforced; courts consider whether the restricted area and time period leave the employee with reasonable alternative employment.

Legitimate business interest exceptions exist: a non-compete lacking a protectable legitimate business interest (trade secrets, confidential information, or substantial customer relationships) is void. Goodwill or general competitive harm alone does not justify enforcement. Non-competes entered into after employment begins (non-competes that accompany promotions or raises) are subject to heightened scrutiny; courts require independent consideration beyond continued employment.

Employers cannot use non-competes to indirectly discriminate against protected classes (disability, age, race, etc.). An overbroad non-compete that effectively bars an older worker or disabled worker from re-employment may violate state and federal discrimination law. Statutory employees, such as motor vehicle salespersons regulated under Vehicle and Traffic Law § 470-f, have specific statutory non-compete limits and cannot be required to agree to broader restrictions.

Garden leave and notice period exceptions: if an employer places an employee on garden leave (paid but restricted period), the employee must receive at least 50% of base salary during that time. Employers cannot simply terminate and then seek to enforce a non-compete; the employee must either receive the mandated compensation or the employer must provide a notice period of equivalent length before enforcement. Non-competes contained in severance agreements may be enforceable if the employee receives independent consideration (severance pay) beyond what is owed.

Unions and collective bargaining: non-competes in union contracts are subject to the same reasonableness standard but courts give deference to union-negotiated terms. However, even union agreements will not be enforced if unreasonable in time or geography.

Step 1: Document the non-compete violation thoroughly. Save the actual non-compete agreement (signed copy), any garden leave notice, compensation records, employment records showing your role and the restricted area, and communications from the employer enforcing or threatening enforcement. Keep a timeline of when you were terminated and when you began new employment. Take screenshots of company confidential materials you may have had access to, and document what constitutes legitimate trade secrets versus general industry knowledge. If the employer is currently enforcing the non-compete (threatening lawsuit, sending cease-and-desist letters, contacting your new employer), preserve those documents immediately.

Step 2: Determine whether you have a valid claim to challenge the non-compete. Review your employment contract and the non-compete clause to identify the stated restrictions on time, geography, and prohibited activities. Check your salary: if you earn less than $75,000 per year, the non-compete is automatically unenforceable under New York Judiciary Law § 753. If you earn more, assess whether the employer provided you with garden leave compensation (50% salary) during any restricted period or a notice period of equivalent length. Identify whether you actually had access to legitimate trade secrets or substantial customer relationships; if the employer cannot demonstrate one of these protectable interests, the agreement may be void.

Step 3: Consult an employment attorney licensed in New York before taking your new job or immediately after receiving a cease-and-desist letter. Do not ignore enforcement threats; this is not a matter to handle alone. An attorney will evaluate the enforceability of your specific non-compete under General Obligations Law § 5-322 and advise whether you can safely accept the new position or if you need to seek a declaratory judgment that the non-compete is unenforceable. New York courts permit employees to sue proactively (declaratory judgment action) to establish that a non-compete is void before the employer sues. Your attorney may file suit in New York Supreme Court asking the court to declare the non-compete unenforceable.

Step 4: If your attorney determines the non-compete is likely enforceable, explore negotiation with your former employer or the new employer. Many cases settle through modified non-competes, buyouts of the restricted period, or indemnification agreements where the new employer agrees to defend you. If litigation is necessary, expect discovery (document exchange and depositions) lasting 4 to 8 months, followed by motion practice. Trials in non-compete cases can take 2 to 5 days. The prevailing party may recover attorney fees if the non-compete is found to be a malicious or abusive restraint on trade, though this is uncommon.

Step 5: File a declaratory judgment action in New York Supreme Court if the non-compete appears unenforceable. The court can declare the non-compete void without waiting for the employer to sue first. You will need to file a complaint alleging: (1) the parties' status (employer and employee), (2) the terms of the non-compete, (3) your actual role and compensation, (4) why the non-compete is unreasonable in time, geography, or scope, and (5) that you intend to accept employment that the non-compete would restrict. Jurisdiction lies in the county where you worked or where the employer is located. Include any evidence that the non-compete lacks a legitimate business interest or that you were not compensated during any restricted period. Court filing fees are approximately $210 to $275 depending on the claim amount.