A Non-Compete Agreement is a contract an employer asks an employee to sign stating that they will not leave to work for a competing employer or start a company of their own in the same field. Despite being a frequent and controversial subject in antitrust discourse over the last decade, Non-Competes are still commonplace. A 2019 report by the Economic Policy Institute found that roughly half of all private sector businesses ask their employees to sign Non-Compete Agreements.
Non-Competes can be murky. If you have experience in an industry, it is natural to want to continue working in that field, whether with another company or by starting their own. So do you have to sign a Non-Compete Agreement – and if you have already signed one, is it legally enforceable?
There is no law that says you have to sign a Non-Compete Agreement, although your employer may expect you to. Enforceability of Non-Competes depends on the state your employer is located in. The laws vary significantly by state, and they are illegal in California, North Dakota, and Oklahoma. As we write this, President Biden has asked the Federal Trade Commission to ban Non-Competes entirely, so the practice may no longer exist in the future.
In New York, the enforceability of a Non-Compete Agreement depends entirely on its circumstances. At Canales PLLC, we get the call frequently from both sides: employers wanting to sue their former employees for working for a competing company, and employees being sued by their former employers for working for a competing company. It is especially frequent in the medical and consulting fields.
These cases normally make it to court in New York, where a Judge will examine the situation and rule on the Non-Compete’s enforceability. In New York, they are generally found to be unenforceable unless they are considered “reasonable.” Even if they are found to be enforceable, the court may limit the scope to releasing trade secrets, not simply working for a competitor.
In fact, the Attorney General’s office of New York has stated “A Non-Compete is only allowed and enforceable to the extent it (1) is necessary to protect the employer’s legitimate interests, (2) does not impose an undue hardship on the employee, (3) does not harm the public, and (4) is reasonable in time period and geographic scope.” Those “legitimate interests” are typically relegated to trade secrets and confidentiality.
Enforceability of Non-Competes in New York is entirely up to the circumstances of the situation. For more information, contact Canales PLLC. We serve the litigation needs of both corporations and individuals.
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