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New York businesses need to be careful about non-competes

On behalf of Steven Waldinger

This article looks at non-compete agreements and why they could soon be harder to enforce in New York.

Non-compete agreements have been in the news quite a bit in recent years, primarily due to a number of companies requiring low-level workers to sign seemingly over-restrictive employment contracts. New York has been one of the main battlefields in the fight over non-compete agreements and businesses in the state need to be aware that such agreements may be unenforceable if not drafted properly. Furthermore, both the state and New York City itself are looking at ways to further restrict the use of non-compete agreements.

What is a non-compete agreement?

A non-compete agreement is essentially a clause in an employment contract that puts restrictions on the type of employment an employee can seek if and when that employee leaves their current position. For example, a senior executive at a clothing retailer with access to sensitive trade secrets may be asked to sign a contract that prohibits him or her from working for other clothing retailers within a certain geographic area and for a certain amount of time.

Non-compete agreements protect businesses from unfair competitive practices, such as former employees offering trade secrets to competing businesses. The problem, however, is that some companies have used non-compete agreements a bit too liberally. As USA Today reports, about 38 percent of U.S. workers have signed a non-compete agreement at one point, including about a third of workers making less than $40,000 per year.

Non-compete agreements in New York

Non-compete agreements are enforceable in New York, but businesses have to understand that asking all employees to sign the same non-compete agreement is likely not going to be looked upon favorably by the courts. Instead, businesses need to balance various factors when drafting a non-compete agreement, such as the employee’s status at the company and their access to sensitive information. Asking a janitor at a company to sign the same non-compete agreement as the CEO simply does not make sense in most cases.

Furthermore, changes could be coming to New York’s non-compete laws. New York Attorney General Eric Schneiderman has reached settlements with three large corporations over their alleged misuse of non-compete agreements and has been pushing for new state laws to curtail the widespread use of such agreements. Likewise, as HR Dive reports, New York City is currently considering legislation that would prohibit the use of non-compete agreements for any employee who is covered by the federal Fair Labor Standards Act for overtime pay.

Getting legal advice

The shifting legal environment that businesses in New York face shows why it is so important that they have legal counsel on hand at all times. An experienced commercial law firm can help businesses navigate the ir legal duties and responsibilities so that they stay on the right sight of the law and reduce their potential liability exposure.