New York Employment Lawyer Blog

There is only one reason to sign a non-compete agreement and that is the desperate need for a job. But - if you have options, you should never sign one.

First, any company that makes it's employees sign these agreements is probably a rotten place to work. These agreements protect the company - but think about what they do to you. They can ruin your career. These agreements can force you out of your industry - they can bar you from doing what you do - they can ruin your career. Why work for a company willing to do that to you? Companies that make employees sign these things do not care about you - they care only about themselves no matter what it does to you. Do you want to work for a place like that? If you can, find another place to work.

There are rare occasions when a non-compete is justified, but today they are vastly overused and abused and companies now make routine employee's sign them. In my view, a non-compete is only warranted in the rare case where a high level employee truly can do a company serious harm by taking key customers or vital company knowledge. In those unusual cases, a non-compete is justified but the company should pay the executive his or her salary during any non-compete period and the period should be short - like six months.

New York companies claim non-compete agreements are necessary to survive. But this is a fallacy. In California, they are illegal and totally unenforceable and California has some of the most innovative and successful companies in the country. Since so many great companies like Apple, Facebook, Hewlett Packard, Ebay and many others are able to do fine without them, why are they used at all? The answer is that they are not really needed at all, instead they are abused and used by many companies to trap employees. If a company cannot earn employee loyalty, they enforce it with a non-compete agreement.

These agreements are enforceable in New York. Many people choose to brush over them and sign them without realizing what they are doing. If you sign one, you need to know that you could wind up being forced to change your career just because you signed that agreement. It happens all of the time. Courts in New York do enforce them and they can have a devastating impact on your life. It could happen to you. Do you like what you do? Have you invested a lot in building expertise in a field or building a reputation in an industry? Well that could all be wiped out by a non-compete agreement.

We get calls from people who have signed non-compete agreements and changed jobs only to get a letter telling them they are violating a non-compete agreement. They are often stunned when we tell them that it is enforceable and that they need to change careers or risk getting sued.

There is a great blog today by Michael Helfand in Today's Workplace on non-compete agreements.   The point of the post is that more employers today are requiring people to sign non-compete agreements as a condition of employment.   It is an employer's market now with so many hungry job applicants and employers are taking advantage of their leverage and requiring applicants to forgo benefits, take lower pay and even sign non-compete agreements.   You should read Michael's post to learn about all of the factors that are considered in determining when a non-compete agreement is enforceable.

In New York, courts will enforce non-compete agreements.   They have to be reasonable and limited in scope, time and geographic reach as explained in Michael's post.   However, even if the agreement is unreasonable in some part, many judges in New York will simply modify the non-compete agreement and enforce the modified version.   For example, if a non-compete agreement states that the employee is bound for three years, a New York judge may find that three years is too long and change it to two years.   This is called "blue penciling" the agreement.   This means that New York non-compete agreements will be enforced even if they are illegal when written - the courts will simply modify them so they are legal.

In New York, non-compete agreements must be taken very seriously because even if the agreement itself is too broad or overreaching, it may still be enforced in a modified version.   You can be kept out of your industry for years and that can ruin your career and be financially devastating.  Most judges do not like non-compete agreements, but they will enforce them so be careful if you are presented with one.   It is a loaded weapon - you are giving your employer the power to do serious damage to your life.   In my view, non-compete agreements should be avoided at all costs.

Non-compete agreements should only be requested in rare situations in which the employee has access to critical company information.  For example, many CEO's are required to sign non-compete agreements because they have access to key company information and could do serious damage if they leave and work for a competitor.   But your average employee does not have the ability to do any unique damage if they work for a competitor and there is no reason for average employees to sign non-compete agreements.   Yet many companies today are doing this.   Think seriously about walking away from those jobs because you are giving the company the power to do major harm when your employment ends.

If you have a question about a non-compete agreement, feel free to give us a call.   We can help you analyze your agreement and help negotiate one that is less restrictive.

As you may know, New York and most other states do not prohibit non-compete agreements. In fact, NY courts will enforce these agreements. In California, non-compete agreements have been prohibited since 1850 and many believe that this policy has contributed to the growth of California's economy and especially so in the technology field.

Just this week the National Law Journal ran an article by Richard A. Booth that suggests that California's law against non-compete agreements may actually be good for business — especially the technology business. Mr. Booth argues that without non-compete agreements, companies are forced to retain quality employees with equity or other inducements. He also argues that with out the shackles of non-compete agreements, good employees are free to leave less productive companies at will. He suggests that this freedom of movement creates a more efficient marketplace and allows the best employees to be drawn to the best companies.

In New York, by contrast, good employees get trapped with bad companies by non-compete agreements and this hinders growth as human resources get stuck in poorly run companies. The net effect of non-compete agreements is that employees lose the ability to move and the economy is handicapped. Companies can tie up human resources with non-compete agreements. In my opinion, New York should change its ways and stop letting companies hamper the market place with non-compete agreements.

New York employees can find themselves entangled in a web of non-compete agreements from current and former employers. A recent client found himself ensnared in such a web and we sorted out the non-compete mess for him. I write this post (with made up names and changed circumstances) so others can learn and avoid the trap.

Joe is a great salesman for Lively Medical Products. He has been selling their patented heart valves for 5 years and Lively loves him. But Godzilla Medical Device Company has a new heart product and they want to hire Joe as their salesman. Godzilla offers to double Joe's salary.

Joe signed a non-compete agreement when he first started with Lively and it prohibited from contacting any of his customers for two years after he left Lively. It also prohibited Joe from selling any products that were considered "competitive products."
Joe told Godzilla about the non-compete agreement that he had with Lively and Godzilla's legal team reviewed it for Joe. Godzilla's new heart product was different than the product Joe sold for Lively so Godzilla's lawyers told Joe that Lively's non-compete would not be a problem. Joe never had his own lawyer review the situation and instead he relied on Godzilla.

Joe resigned his position with Lively and signed an employment agreement with Godzilla. Godzilla's employment contract also contained a non-compete agreement and Joe agreed to the new terms with Godzilla.

As soon as Lively found out that Joe was selling heart products for Godzilla, it had its law firm send a letter to Joe that accused him of violating his non compete agreement. Joe showed the letter to Godzilla and they told Joe to ignore the letter which he did. Ten days later Joe was sued by Lively in federal court.

Joe showed the lawsuit to Godzilla and asked them to defend him. Godzilla, however, was not interested in dealing with a lawsuit and determined that it would be better off firing Joe and hiring another salesmen. Godzilla then advised Joe that his employment was terminated.

Joe then found himself without a job and bound by two different non-compete agreements, one with Godzilla and one with Lively. Joe approached the other medical device companies that sold the products he was familiar with and they all liked Joe, but determined his non-compete agreements prevented them from employing him.

Joe was without a job and was basically barred from his industry due to his two non-compete agreements. The other companies in his industry did not want to risk expensive litigation over his non-compete agreements.

Did Joe have any rights? Could he sue Godzilla for messing up his career? No, Joe had no rights and there was nothing he could do now. Joe was an employee at will and Godzilla was free to fire him.

But Joe could have prevented the problem if he had obtained an employment lawyer to help him negotiate a better employment agreement with Godzilla. Joe's employment agreement with Godzilla should have contained a clause in which Godzilla promised to defend him in any suits that concerned his non-compete agreement with Lively. Also, the Godzilla employment agreement should have contained a promise to pay his salary if he was barred from working during the non-compete period. This would have protected Joe. Also, if Godzilla refused to accept these terms, then Joe would have known who he was dealing with and he could have stayed with LIvely.