The State of Non-Compete Clauses in NY Today

By Greg Kowalsky

While NY courts have stated repeatedly that they disfavor enforcing non-compete clauses,[1] more and more NY courts have found these clauses acceptable.[2]  The problem with this is that the policy NY has held important for so long in disfavoring these covenants is beginning to be swallowed up by the courts’ proclivity to enforce mutually agreed upon contracts.

The Court of Appeals opined that these covenants should only be upheld if the employer needs to protect some legitimate interest, the employee would not be unduly harmed, and the clause is not injurious to the public.[3]   The Court has also held that for non-compete clauses to be considered reasonable, and to avoid any undue hardship on employees, they must be limited temporarily and geographically.[4]

These conditions placed on enforceability illustrate the Court’s intention to protect employees’ interests.  New York has long protected the ability of its citizens to earn a livelihood by whatever skills they have developed through hard work and determination.[5]  These non-compete clauses have the effect of restraining persons from using those skills acquired over the years in earning a living.  Non-compete clauses also deprive employees of using their unique skills and hard work as leverage in negotiating raises and promotions.  If employers are able to restrain their employee’s ability to work for a competitor in the same field, their employees can no longer effectively be paid commensurate with their value.

New York courts have upheld non-compete clauses ranging as far as 150 miles from their former’s employer’s office.[6]  The Second Department has even upheld non-compete clauses that do not have geographic limitations and that last as long as 2 years.[7]  To allow restraints on employees for as long and as far as these courts have upheld will swallow up the policy of disfavoring such agreements set forth by the Court of Appeals. However, if the courts continue to follow the trend that they have begun, upholding a non-compete clause that lasts five years and covers employers as far as 300 miles from the former employers office may not be too far away. [8] If NY is to continue its pro-employee policy, the courts need to begin drawing lines more clearly in what types of non-compete clauses are enforceable.

[1] Richard Manno & Co. Inc. v. Manno, 34 Misc. 3d 1225(A) (N.Y. Sup. Ct. 2012) (citing BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999)).

[2] Borne Chem. Co. v. Dictrow, 445 N.Y.S. 2d 406 (2d Dept. 1981); Uniform Rental Div. v. Moreno, 83 A.D.2d 629, 441 N.Y.S.2d 538 (2d Dept.  1981).

[3] BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999).

[4] Columbia Ribbon & Carbon FG. Co. v. A-1-A Corp, 42 N.Y.2d 496 (1977).

[5] See Reed, Roberts Assocs. V. Strauman, 40 N.Y.2d 303, 307 (1976).

[6] Borne Chem. Co. v. Dictrow, 85 A.D.2d 646, 649 (2d Dept. 1981).

[7] Uniform Rental Div. v. Moreno, 441 N.Y.S.2d 538 (2d Dept 1981).

[8] Maxon v. Franklin Traffic Service, Inc., 689 N.Y.S.2d 559, 561 (4th Dept. 1999).

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One thought on “The State of Non-Compete Clauses in NY Today

  1. Sima Vaisman says:

    Excellent article!
    I have been working for a Recruiting firm for 10 years. I would like to negotiate better bonus and everytime I bring up the subject my boss says no. I have a non-compete that stops me from recruiting for 50 miles around our office for an entire year. I have had multiple offer from other firms that would offer me better compensation. Can I leave? or do I have to work here for the rest of my life? I can’t afford stop working for an entire year. Please help!

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