Non-Compete Agreements — Suri Law PLLC, New York

Protecting Your Business and Employment Interests

At Suri Law PLLC, we help businesses and professionals across New York City, Long Island, and Queens navigate the complexities of non-compete agreements. These agreements are vital tools for protecting business interests, confidential information, and client relationships, while ensuring compliance with state and federal laws and regulations.

What is a Non-Compete Agreement?

A non-compete agreement is a legal contract that restricts someone, like a business partner or the seller of a business, from engaging in a competing business or working with competitors for a specified period and within a defined geographic area.

Non-compete agreements can:

• Prevent sellers of businesses from taking clients or trade secrets to new ventures.
• Protect investments in proprietary technology, processes, or branding.
• Maintain competitive advantage in a crowded market.
• Prevent business partners from undermining your entity’s position in the market.

Types of Non-Compete Agreements

1. Business-to-Business Non-Competes

Business owners may use these agreements when entering joint ventures, partnerships, or franchise agreements to:

• Limit competitors from poaching key clients or employees
• Protect confidential business strategies
• Safeguard proprietary products or services

2. Contractor and Consultant Non-Competes

Independent contractors and consultants may also be subject to non-compete clauses to prevent the misuse of confidential information or unfair competition after the engagement ends.

3. Employee Non-Competes

These agreements prevent current or former employees from joining competitors or starting a competing business. They are often tailored to:

• Executive leadership and management
• Sales teams with client relationships
• Employees with access to trade secrets

On May 7, 2024, the Federal Trade Commission (FTC) published the Non-Compete Clause Rule (the “Rule”). While most people know that the gist of the Rule is generally against non-compete agreements, what does that specifically mean for you? Effective September 4, 2024, any new non-compete agreements entered into will be unenforceable since the FTC deems them an unfair method of competition. As for existing agreements, they fall into two categories:

• agreements with non-senior executive employees; and
• agreements with senior executive employees.

The Rule, codified as 16 CFR Parts 910 and 912, defines “senior executive” to “refer to workers earning more than $151,164 who are in a ’policy-making position’ as defined in the final rule.” 

For non-compete agreements with non-senior executives, existing agreements will be rendered unenforceable on the effective date of the rule. However, valid non-compete agreements with senior executives from before the effective date of the Rule will remain in force meaning that they are enforceable to the fullest extent of the law. 

While this may not sound ideal for senior executives, New York Courts generally disfavor enforcing non-compete agreements. There is a high bar for showing that a non-compete agreement is valid. The employer must show that the agreement “is reasonable in time and area, necessary to protect the employer's legitimate interests, not harmful to the general public and not unreasonably burdensome to the employee.” (See Reed, Roberts Assoc., Inc. v. Strauman et al., 40 N.Y.2d 303 [1976]).

The FTC also imposed restrictions and obligations on employers to effectuate changes under the Rule.

First, employers may not include non-compete agreements or provisions in future employment agreements or other contracts with workers because it found to be a per se method of unfair competition. This means employers cannot contract around this regulation and will be violating the Rule if they try to enter into a non-compete agreement after September 4, 2024.

Second, employers are required to notify any employee with whom they have a non-compete agreement that it is no longer in effect. 

The FTC has and will continue to issue guidance materials for businesses to comply with the requirements of the rule, but we at Suri Law are available to assist if you need us.

Key Considerations for Non-Compete Agreements in New York

• Reasonable Duration: In the case of a business or business, seller to buyer, or other non-employee relationships, New York courts generally enforce agreements with a time limit that is fair and justifiable. However, overly long restrictions may be deemed unenforceable.
• Geographic Scope: The agreement must be limited to areas where the company actually conducts business.
• Legitimate Business Interest: Employers must demonstrate that the non-compete protects real business interests, such as trade secrets, customer relationships, or specialized training.
• Consideration: New York law requires that employees receive something of value in exchange for agreeing to a non-compete, such as effectuating the sale of a business, engaging in a vendor agreement, or a bonus.

Why Legal Guidance is Crucial

Non-compete agreements are closely scrutinized by courts, especially in New York. A poorly drafted or overly restrictive agreement may be unenforceable, leaving businesses unprotected. Conversely, an overly aggressive agreement can create legal disputes.

At Suri Law PLLC, we:

• Draft clear and enforceable non-compete agreements tailored to your business needs.
• Review existing agreements to ensure compliance with New York law.
• Advise on negotiation and enforcement strategies for contractors, business associates, or business partners.

Frequently Asked Questions

Are non-compete agreements enforceable in New York?  
Yes, except where they are with an employee and violate the FTC’s Rule, but only if they are reasonable in duration, scope, and geographic reach, and protect legitimate business interests.

How long can a non-compete last?  
Typically, up to 2 years is considered reasonable, depending on the industry and role.

Can a non-compete prevent me from working in my field?  
Non-competes are meant to prevent unfair competition, not to completely block someone from their career. They must be reasonable and limited to protect legitimate business interests.

What happens if someone violates a non-compete?  
Legal remedies may include injunctions to stop the violation or financial damages for losses caused by the breach.

Protect Your Business and Career

Whether you are a business owner looking to protect confidential information or looking to buy a business, a well-crafted non-compete agreement is essential.

At Suri Law PLLC, we provide strategic legal guidance to ensure your agreements are enforceable, fair, and aligned with your business or career goals.

Call us today at (212) 444-8244 or contact us online to discuss your non-compete agreement needs.