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New York Law on Covenants Not To Compete
Covenants not to compete, also known as non-compete clauses, are standard paragraphs in employment contracts. Essentially, covenants not to compete proscribe former employees from working for competing companies in a certain industry for a certain time period. Covenants not to compete aim to prevent former employees from sharing proprietary information such as product details, business models, marketing campaigns, manufacturing processes, and customer contact information.
Although covenants not to compete have been around for more than 600 years, judicial antagonism against them has been just as prevalent. There is a public policy in favor of economic freedom and employee mobility, and against indentured servitude and trade restraints. In New York State, this judicial antagonism against covenants not to compete remains alive and well.
As with federal law, there is no New York statute governing covenants not to compete. Instead, judges can use their discretion and past judicial decisions to give a “thumbs up” or “thumbs down” to a contested covenant not to compete. And the current trend is to give them a “thumbs down.”
New York employers must be careful when drafting covenants not to compete. The proprietary information protected should be relevant to the particular business, and not just long “laundry lists” of every kind of information under the sun. Covenants not to compete should be short and concise, not written in meaningless “boilerplate” legalize tending to confuse employees, or “hidden” in other language.
Covenants not to compete must be reasonable in scope, and should never extend beyond the reach of the company and its customers. They must also be reasonable in time – a New York court recently said that a year is too long to keep an employee from working in her chosen field. The scope should even be more limited for “at-will” employees, whom the company can dismiss at any time.
Nowadays, employee mobility is more and more common. However, it remains true that New York employees cannot steal confidential information in order to share it with another company, nor can they actively recruit other employees to work for a competitor.
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