Non-Compete and Non-Solicitation Agreements

In both New York and New Jersey, non-compete agreements are supposed to protect the employer’s legitimate interests, such as its confidential information and trade secrets. Critics of non-competes claim they limit employees’ abilities to find another job and negotiate a raise.

In early 2024 New York came close to banning noncompete agreements in employment contracts in New York, however Governor Hochul vetoed the proposed law which would have banned them. Opponents claim they stifle competition and negatively affect the labor market.

Many companies utilize non-competition agreements to protect themselves from competing businesses. In New York, they are unenforceable in situations where an employee is terminated for reasons other than gross misconduct. While they may be challenged in the future, companies desiring to create enforceable noncompete agreements should be aware of the best practices in formulating enforceable agreements that will sustain a legal challenge. For example, in both New York and New Jersey a non-compete may not be enforced if it imposes an undue hardship on an employee or is unduly harmful to the public. In practice, a company should articulate the legitimate business reason for the noncompete and limit their term as well as geography and their scope (i.e. by a certain industry sector) where appropriate. Because there is pressure from the labor-side on noncompete agreements, the law should continue to be monitored and taken into consideration.