Business in New York can be highly aggressive, and relies, in part, upon a business's ability to protect valuable information disclosed to current and past employees. Many companies feel that implementing non-compete agreements and other contractual obligations will encourage employee retention overall and protect information should an employee leave. It is important for New York businesses to understand, however, that there are restrictions to when and how non-compete agreements can be enforced.
Traditionally, non-compete agreements are used in companies and industries involving sensitive proprietary information and/or trade secrets. Non-compete agreements are commonly found across many industries regardless of size or products or services offered. They can take many forms depending on the information to be protected, including confidentiality agreements (prohibiting use or revealing information) and non-solicitation agreements (prohibiting approaching customers, poaching employee or contacting vendors). However, courts can find that non-compete agreements are invalid if they overreach in protecting a company's information.
The validity of a specific non-compete agreement is taken on a case-by-case basis.
- The employer must prove that the non-compete agreement is necessary and relevant for the position and industry in question. That includes articulating the potential harm to the employer should a breach occur.
- The contract must draw clear, realistic boundaries for any prohibited competing territory.
- The contract must also draw a definite time period.
- The employer must limit the impact on the affected employees and the agreement's impediments to their future employment. The agreement should not negatively impact the commercial market or compromise the employee’s livelihood.
*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com.
Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.