Enforcing Non-Compete Agreements
Non-compete agreements are often necessary to protect legitimate business interests. To enforce an agreement, employers may try to obtain an injunction or court order to prevent an employee or executive from working for a competitor. For example, if you are a Manhattan start-up that has spent a lot of time developing intellectual property, you may want your higher-level engineers to sign non-compete agreements that would prevent them from working for another start-up in New York City for a few years. You would not want them to take your confidential materials and use them to further a competitor's business.
New York courts use a three-prong test to determine whether a non-compete agreement is reasonable, and this test is instructive when getting an agreement drafted or when trying to determine whether your existing agreement is likely to be upheld. The court may find a non-compete restraint reasonable if:
- The agreement is no greater than what is required to protect the employer's legitimate interests;
- The agreement does not impose an undue hardship on the employee; and
- The agreement is not injurious to the public.
Non-compete agreements are more likely to be enforced when they are necessary to prevent the disclosure of trade secrets or confidential customer information when the employer's services are unique and the agreement is narrow in scope. Crucially, if you want to enforce a non-compete agreement, it must be limited both in scope and duration.
For example, if you try to prevent an engineer from ever working in the IT sector again, this is too broad. However, the same agreement might be enforced if it specifies that the engineer cannot work for a retail technology start-up in New York City for six months. There is more latitude when the employee or executive is a "professional"—that is, they provide unique or extraordinary services.
There is also more latitude when a company needs to protect its business relationships or confidential customer lists, even when the business' services are not "unique." Courts tend to uphold agreements when an employee has been allowed to share in the goodwill of clients or customers that was created overall by the employer's expenditures of time and money. An employer has a legitimate interest in preventing the exploitation of that goodwill to the employer's detriment.
If you are an employer, you should be aware that sometimes courts do not enforce a non-compete agreement for reasons outside the agreement. For example, if you terminate an employee without good cause, some courts have found that you cannot then turn around and stop the employee from finding work within the industry.Consult a New York Attorney for Guidance on a Business Dispute
If you are trying to resolve a business dispute in New York or elsewhere in the U.S., you can consult the lawyers at Klapper & Fass. We help many enterprises protect their interests by using non-compete agreements and other tools. From our offices in White Plains and Manhattan, we serve the five boroughs of New York City as well as Orange, Nassau, Dutchess, Westchester, Suffolk, and Rockland Counties. We also provide services in other states, such as New Jersey and Texas. Contact our office at 914.287.6466 or via our online form to schedule an appointment with us.