Factors To Consider When Creating Non-Compete Agreements

NY Business Law, NY Employment Law

Drafting a non-compete agreement can be tricky if you do not consider legal factors that will make or break the document.

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.

  1. 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. 
  2. The contract must draw clear, realistic boundaries for any prohibited competing territory.
  3. The contract must also draw a definite time period. 
  4. 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.

The issue with drafting non-compete agreements is determining what is “reasonable” with regards to each consideration. While we suggest that you to read our previous posting on how to create a valid non-compete clause in New York, which provides a sense of what New York jurisprudence considered “reasonable,” nothing can substitute the advice of an attorney that reviews the specific facts and circumstances of your given situation.
*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.

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