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Beat A Non-Compete Agreement: Frequently Asked Questions

above-the-bar-logo-no12Did you sign a non-competition agreement when you were hired and now want to go to a new employer? Is your employer threatening to use the agreement against you after you left your job? Can the agreement even be enforced? Our award winning New York Employment Lawyers have over 25 years of combined experience and have helped transition many employees with lateral moves. Call now at (800) 893-9645 to confidentially learn your rights and options. Previously, such agreements were only used by large companies and were only enforced against their more senior executives. However, this is no longer the case today and many companies have many of their employees sign these agreements as a condition of their employment or severance from the company. If your transition is not handled correctly, you could lose your new job offer and/or get sued by your former employer. These cases are highly specific and require individual analysis by an experienced lawyer.

The Law: General Background

Initially, generally it should be noted that there is no applicable stature or regulation governing non-compete agreements in New York. Generally speaking, New York disfavors non-compete agreements and sees them as an unreasonable restraint on trade [(See, Reed, Roberts, Assoc., Inc., v. Strauman, 40 NY2d 303 (1976)]. Some courts (but not all) in New York state that non-competition agreements are not enforceable if you were fired without cause [See Arakelian v. Omnicare Inc., (735 F. Supp. 2d 22 (2010)). Of course, there are exceptions, since each case is fact specific and you should seek experienced employment law counsel for your specific situation. The idea behind the enforceability of these agreements, also known as restrictive covenants. is based on the assumption that an employer would be willing to hire the dismissed employee (because he/she was let go without cause) and is sometimes referred to as “mutuality of agreement”. Moreover, some professions have their own rules regarding non-compete laws. For instance, the legal profession is governed by Rule 5.6 of the New York Rules of Professional Conduct. Rules 2140 and 11870 of the Financial Industry Regulatory Authority Rule governs the financial industry.

Enforceability

A. Who Bears the Burden of Enforceability?

The party seeking to enforce the agreement (usually the employer) has the burden of proof.

B. Can My Non-Compete Agreement Be Enforced Against Me?

While non-compete agreements are generally disfavored in New York, they will be enforced where the restriction is deemed “reasonable”, which is determined on a case-by-case basis. Enforceability is determined by looking at some of the following factors:

1. Does not impose undue hardship on the employee;
2. Causes no injury to the public;
3. Is no broader than necessary to protect the employer’s legitimate business interest;
4. Is reasonable in its duration and geographic scope.

So what actually qualifies as a “legitimate business interest”?

1. Trade secrets or confidential information;
2. The employer’s goodwill; and 3. Preventing a competitor from hiring an employee with “special” “unique” or extraordinary” skills.

Can The Non-Compete Be Enforced If I Quit?

Regardless of whether you quit or were fired the general rules discussed above still apply. However, if you were fired “for cause”, the agreement may be enforceable but in some situations, the employer for practical reasons may not seek to enforce it. But, if your employer breaches the employment contract, it is possible to argue that the non-compete clause will not be enforced against the breaching employer, [see, Cornell v. T.V. Dev. Corp., 17 NY2d 69, 75 (1966].

Also, New York law permits courts interpreting non-compete agreements to modify the agreement if it is found to be overbroad. However, they are not required to do so. If you are not sure if your agreement has such a provision, call one of our attorneys.

What Effect Do Choice Of Law Provisions Have On The Non-Compete Agreement?

New York courts will enforce Choice of Law provisions if the forum selected has a substantial relationship to: 1) the parties, or, 2) the jurisdiction. and, 3) where application of the selected forum’s law is not at odds with fundamental policy considerations of a state that may have a potentially greater interest. But, employees should always remember that they have a duty of loyalty to their employer while they are working for them, which means they can not compete with their employer while employed by them. Violation of this duty may result in termination, fines and/or other penalties. You should contact one of our attorneys should this issue ever arise. Related to the duty of loyalty are non-solicitation, non-disclosure, and, confidentiality agreements, which may be enforced even if the non-compete clause is not enforceable. Our attorneys can explain the differences and how they may affect your agreement.

Can My Non-Competition Agreement Be Voided?

Abuse of these agreements has become more prevalent and has resulted in litigation surrounding their enforceability. You should call one of our experienced employment law attorneys if you find yourself subject to one of these agreements.

4 common ways to argue that the non-compete agreement should not be enforced.

1. Argue the Agreement is Too Broad:

Non-competition agreements must be reasonable in terms of their
time, activities, and geographic scope. For example, if an employee works for a New York company, a non-competition agreement that is international or even national in scope may be stuck down as too broad:

2. Argue That Your Employer Breached The Agreement:

A valid non-compete agreement may not be unenforceable against the employee by the employer if the employer violated another provision of the agreement. A typical example would be where the employer failed to pay the employee his/her severance or bonus as required by the agreement.

3. Show That Your New Position Does Not Compete With Your Old Position:

You may be able to avoid your non-compete agreement if you can
prove that your new position is sufficiently different in its nature so that you are not competing with your old company.

4. There is No Legitimate Business Interest to Protect:

You may also be able to argue there is no legitimate business interest to protect, obviating the need for the agreement. Presumably an employer is trying to protect confidential information such as trade secrets, client lists or other private, proprietary information. On the other hand, if you were not privy to sensitive information at your old job, you may be able to successfully argue the agreement is unenforceable as an unreasonable restraint on your ability to work.

Conclusion

If you, or anyone you know, has been terminated from your job and you signed a non-competition agreement, you should seek legal counsel immediately, since not doing so could cost you significant amounts of money, and/or result in an undue hardship on you seeking new employment. Call one of our award-winning NY Employment Law attorneys at (800) 893-9645 who can advise you on how to best protect your business and assets.

Disclaimer: 

Thank you for visiting our Blog. This blog provides general information and thoughts about various employment law issues primarily in the New York Tri-State area and occasionally in other areas. You are welcome to read the posts. However, do not construe any content on this blog as legal advice or the creation of an attorney-client relationship. Again, we provide the content only for informational purposes. You should not make decisions based information on our blog since the application of the law depends on the facts and each situation may be different. In addition, the law in most jurisdictions is different and changes constantly and we make no representations that any information on our blog has been updated. The Blog should not be used as a substitute for competent legal advice from an experienced employment law attorney in your state or jurisdiction.