For the last several years, non-compete agreements have been under sustained attack from regulators, legislators, employees, and courts across the country. Headlines about the Federal Trade Commission's attempted nationwide ban, combined with repeated legislative proposals in New York, have caused many employees to assume that non-compete agreements are no longer enforceable at all. That is not currently true in New York.
New York courts still enforce certain restrictive covenants under the state's longstanding common-law framework. At the same time, however, the overall direction of the law is unmistakable: courts and lawmakers are increasingly skeptical of broad restraints on employee mobility, particularly where the restriction appears designed more to suppress ordinary competition than to protect legitimate business interests.
For employers and employees alike, the modern reality is more nuanced than the internet's usual "non-competes are dead" narrative. Some non-compete agreements remain enforceable in New York. Others are likely unenforceable, overbroad, or vulnerable to challenge. Much depends on the employee's role, compensation level, access to confidential information, and the precise wording of the restriction itself. Employees evaluating these agreements should also understand how restrictive covenants may overlap with broader employment law issues in New York, including retaliation, severance negotiations, and disputes over confidential information.
New York Does Not Currently Have a Comprehensive Non-Compete Statute
Unlike some states that have enacted detailed statutory schemes governing restrictive covenants, New York still relies primarily on judge-made common law. That means courts continue to analyze non-compete agreements through decades of appellate decisions rather than through a single comprehensive statute.
That could eventually change. In 2023, the New York Legislature passed a near-total ban on employee non-compete agreements. Governor Kathy Hochul vetoed the legislation, reportedly expressing concern that the bill was too broad and lacked exceptions for highly compensated employees and sale-of-business situations.
Since then, lawmakers have continued introducing revised versions of non-compete legislation. Several recent proposals would prohibit most employee non-competes while preserving limited exceptions for highly compensated individuals and certain business-sale transactions. Some proposed bills would also require employers to provide "garden leave" style compensation during the restricted period.
As of now, however, New York has not enacted a blanket statutory prohibition on non-compete agreements. Courts therefore continue applying the traditional common-law framework developed through prior appellate decisions.
The Foundational New York Standard: BDO Seidman v. Hirshberg
The most important modern New York non-compete case is generally considered to be BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999). If you are trying to understand how New York courts evaluate restrictive covenants, that case remains essential reading.
In BDO Seidman, the New York Court of Appeals explained that restrictive covenants are enforceable only to the extent they are reasonably necessary to protect legitimate business interests. The Court identified several major considerations, including whether the restriction:
- Protects a legitimate employer interest;
- Is reasonable in geographic scope and duration;
- Imposes undue hardship on the employee; and
- Harms the public.
New York courts have repeatedly emphasized that employee mobility and competition are important public policies. As a result, courts generally disfavor broad restrictions that prevent employees from earning a living in their chosen field.
That skepticism predates modern political debates about non-competes. In Reed, Roberts Associates, Inc. v. Strauman, 40 N.Y.2d 303 (1976), the Court of Appeals strongly emphasized New York's public policy favoring robust competition and an individual's ability to pursue employment opportunities freely.
What Counts as a "Legitimate Business Interest"?
Employers cannot simply prohibit competition because they dislike losing employees to competitors. Under New York law, ordinary competition is generally not enough.
Instead, courts usually look for a recognized legitimate business interest. Common examples include:
- Protection of trade secrets;
- Protection of confidential business information;
- Protection of customer goodwill developed at the employer's expense;
- Prevention of unfair competition by unique or extraordinary employees.
Even then, the restriction must still be narrowly tailored. A company may have a legitimate interest in protecting confidential pricing strategies or client relationships, but that does not automatically justify barring a former employee from working anywhere in the industry.
That distinction is important because employers often overreach. Courts are substantially more willing to enforce confidentiality agreements and carefully drafted non-solicitation clauses than broad "you cannot work for a competitor" provisions. In practice, restrictive covenant disputes are frequently intertwined with disagreements over compensation, commissions, or post-employment obligations, particularly where an employee alleges retaliation or improper workplace conduct surrounding their departure.
New York Courts Often Distinguish Between Different Types of Restrictive Covenants
Many employees refer to all post-employment restrictions as "non-competes," but New York courts often treat different restrictive covenants differently.
A true non-compete provision generally prohibits an employee from working for a competing business altogether. Those restrictions receive the greatest scrutiny.
A non-solicitation provision, by contrast, may prohibit a departing employee from soliciting former customers or co-workers for a limited period of time. Courts are often more receptive to those restrictions, particularly where the employee developed customer relationships using the employer's resources.
Confidentiality agreements are treated differently still. New York courts are generally willing to protect legitimate trade secrets and proprietary information. Federal law may also become relevant in these disputes. For example, the federal Defend Trade Secrets Act, 18 U.S.C. § 1836, creates a federal civil cause of action for trade secret misappropriation.
In practice, employers frequently assert trade secret, fiduciary duty, or unfair competition claims alongside restrictive covenant claims, especially where a broad non-compete appears vulnerable.
Highly Compensated Employees and Executives Face Different Risks
One important trend in recent years is the growing distinction between low- or middle-income workers and highly compensated executives.
Courts are often more receptive to restrictive covenants involving senior executives, equity holders, highly compensated professionals, or employees with access to particularly sensitive information. Legislators appear to be moving in the same direction.
Several recent New York legislative proposals would preserve non-compete agreements for "highly compensated individuals," with some proposals using compensation thresholds around $500,000 annually.
That does not mean every executive non-compete is enforceable. Courts still examine scope, duration, geography, and necessity. But the practical reality is that a narrowly tailored restriction imposed on a highly compensated executive is far more likely to survive judicial scrutiny than a sweeping restriction imposed on a lower-level employee.
Sale-of-Business Non-Competes Remain More Enforceable
New York courts traditionally give greater deference to non-compete agreements connected to the sale of a business.
The reasoning is relatively straightforward. When a purchaser pays substantial money for the goodwill of a business, courts are more willing to prevent the seller from immediately competing and destroying the value of what was sold.
This is one reason Governor Hochul reportedly expressed concern about the 2023 proposed ban's failure to include meaningful sale-of-business carveouts.
Accordingly, restrictive covenants tied to the sale of a company are generally analyzed differently from ordinary employment agreements.
The FTC's Attempted Nationwide Ban Created Confusion, But Did Not Change Current New York Law
In April 2024, the Federal Trade Commission announced a sweeping rule that would have banned most non-compete agreements nationwide.
The rule generated enormous attention and led many people to assume non-competes had effectively become illegal everywhere. That did not happen.
Federal litigation quickly followed. A federal court ultimately blocked enforcement of the FTC rule, and the rule never went into effect.
That said, the FTC and other regulators continue signaling hostility toward broad restrictive covenants. Even without a nationwide ban, the broader policy trend remains clear: aggressive restrictive covenants are increasingly attracting judicial and regulatory scrutiny.
Courts Are Increasingly Skeptical of Overreach
One practical takeaway from modern restrictive covenant litigation is that overreach can backfire.
Employers sometimes attempt to impose sweeping restrictions that prohibit employees from working anywhere in a broad industry, servicing any customer, or operating within enormous geographic regions. Those provisions frequently create enforceability problems.
Although New York courts sometimes "blue pencil" or partially enforce restrictive covenants by narrowing them, courts are not required to rescue poorly drafted agreements. Overly aggressive restrictions can undermine credibility and increase the likelihood of litigation.
Recent commentary and litigation trends also reflect increasing judicial concern about unequal bargaining power, particularly where restrictive covenants are imposed on workers with relatively limited negotiating leverage.
What Employers and Employees Should Understand Right Now
For employers, the modern lesson is usually not "abandon all restrictive covenants." Instead, the safer and more sustainable approach is often to draft narrower agreements focused on genuine business interests. Carefully tailored confidentiality provisions, customer non-solicitation clauses, and protections for proprietary information are generally more defensible than broad prohibitions on competition itself.
For employees, the existence of a signed non-compete agreement does not necessarily mean the restriction is enforceable as written. Courts examine these agreements carefully, and overly broad restrictions may be vulnerable to challenge under New York law. Employees presented with restrictive covenants during hiring, termination, or severance discussions should review those agreements carefully before signing, particularly where the agreement is tied to a proposed severance package or separation agreement.
The area remains highly fact-specific. Small differences in job duties, compensation, customer access, timing, industry, and contract language can materially affect enforceability.
Most importantly, New York law in this area continues to evolve. Legislative proposals continue to emerge, federal regulators remain active, and courts continue refining the balance between protecting legitimate business interests and preserving employee mobility.
Anyone dealing with a restrictive covenant dispute should evaluate the specific agreement carefully rather than assuming either that the restriction is automatically enforceable or automatically void. Employers and employees confronting these issues should consider consulting an attorney familiar with New York restrictive covenant law before taking action. To discuss a non-compete, non-solicitation agreement, or related employment dispute, contact me.