What is a non-compete agreement?

What is a non-compete agreement?

On Behalf of | Apr 4, 2022 | Business & Corporate Law |

Businesses make significant investments in their employees. Their experience and specialized knowledge can be a major asset and provide an unfair advantage to competitors if they change jobs. New York law allows non-competition agreements which can help protect an employer’s investment.

Non-competes

A non-compete agreement should be part of an employer’s business and corporate law planning. Noncompete agreements are intended to stop employees from working for a competitor or starting a competing business. Non-competes usually stay in effect for a specific time after an employee leaves their job. These may be a stand-alone agreement or part of an employment contract.

Enforceability

In New York, a non-compete agreement is enforceable and legal if it meets all of the following requirements:

  • Is necessary to protect an employer’s valid interests.
  • Does not impose an excessive hardship on an employee.
  • Does not inflict harm on the public.
  • Has reasonable time and geographic restrictions.

An employer’s valid interests include safeguarding trade secrets and other confidential information and preventing employees from taking their specialized talent and knowledge to a competitor. Restrictions cannot exceed what is necessary to protect an employer’s legitimate interests.

Courts review an employee’s duties, employer’s business interest and the agreement’s language when ruling on a non-compete’s enforceability. Courts may require an employee to comply with some of the agreement’s provisions even if determines that other parts are unenforceable. Generally, however, a court may invalidate the entire agreement or enforce a shorter time restriction or geographic area if it determines that parts of the agreement are illegal.

Are non-competes mandatory?

New York law does not require employees to sign a non-competition agreement. But employers may require that employees sign these agreements before starting work or afterward.

Because a non-compete is a contract, workers can try to negotiate its terms. Employers may provide bonuses or specialized training, guarantee employment for a specific time or pay for part or all of all the non-competition period in return for an employee signing an on-compete agreement.

Enforcement

Employers can enforce these agreements by filing a lawsuit and asking a court to require an employee to comply with its terms. Employers may, instead of a lawsuit, first send a letter to an employee or their new employer with notice that it may file a lawsuit.

Attorney can draft these and other employment agreements. They can assist employers with protecting their interests and with enforcement of these agreements.