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What Makes a Non-Compete Contract or Clause Unenforceable?

When starting a new job, you have to sign either multiple employment contracts or one beefy contract with more than a few clauses. One of these may include a non-compete contract or clause. Employers will use them to protect themselves if employees want to leave the company or are fired for legal reasons. What it can potentially do is keep an employee from working in the same local area in the same industry… sometimes.

You see, non-compete contracts and clauses have a weakness: if they keep an employee from being able to find a job, they’re legally unenforceable. How do you know when the one you signed is enforceable though? And if it’s not, why would your employer still ask you to sign it? The employee rights attorneys at Bantle & Levy can explain.

What Does Non-Compete Contract Do?

A non-compete contract limits the ability of the employee to work for competitors or start their own competing business for a certain period of time – typically one to two years – after quitting or losing their position. This type of contract is signed at the beginning of an employment relationship, or as a part of a severance package.

What Makes a Non-Compete Clause Enforceable in New York?

According to New York law, non-compete clauses are only enforceable if they meet the following requirements:

  • The clause protects the legitimate business interest of the employer. This includes things such as trade secrets, confidential information, or customer relationships.
  • The clause must be reasonable in terms of duration, geographic scope, and the type of activities that are restricted. For example, there are very few situations where a non-compete contract or clause could be enforceable across the whole country or even several states.
  • The employee must have received something of value in exchange for signing the non-compete clause.

If any of these requirements are not met, the non-compete clause may be deemed unenforceable by a court.

Important Update on the Legality of Non-Competes

It is important to note that New York law is currently considering banning non-compete agreements for every instance except for three:

  • Any agreements with a prospective or current covered individual that establish a fixed term of service.
  • Agreements that solely prohibit employees from revealing or using trade secrets, confidential information, or client information.
  • Any agreements that solely prohibit the solicitation of the employer’s clients that the employee learned about during employment.

Exceptions to Non-Compete Contracts in New York

There are certain exceptions to the enforceability of non-compete contracts, even without the new law potentially being passed. For example, physicians, attorneys, and other professionals who need a license to operate may be exempt from such agreements due to public policy concerns.

Additionally, non-compete contracts may not be enforceable if the employee was terminated without cause. For example, if an employee proves that they were terminated for discriminatory reasons, they may no longer be beholden to the non-compete contract.

Contact the Employee Rights Attorneys at Bantle & Levy for Help

A non-compete contract or clause is meant to protect a business’s interests, but that doesn’t mean it’s always reasonable. When this is the case, there are certain exceptions and circumstances where a non-compete contract may not be enforceable.

Both employers and employees need to understand these requirements to ensure that any non-compete agreements are valid and enforceable. So, you should always have an attorney review a non-compete contract before you sign it.

The attorneys at Bantle & Levy have extensive experience with non-compete contracts, so contact us as soon as possible.

Bantle & Levy

Lee Bantle is a partner at Bantle & Levy LLP. He has extensive legal expertise, admitted to the bars of the U.S. District Court and the U.S. Court of Appeals. With a distinguished academic background and clerkship experience, he has been recognized as a top-rated civil rights attorney and esteemed lawyer. In addition to his successful career, he has actively contributed to various legal organizations and serves as a faculty member for NYU's Annual Workshop on Employment Law for Federal Judges.

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