As a business owner on Long Island, it’s crucial to take all necessary steps to safeguard your company and its good will. By having each partner or key employee sign a non-compete agreement, you can help shield your proprietary information, trade secrets, and customer relationships. However, it’s essential to understand what makes these agreements enforceable to ensure your interests are adequately protected.
What is a Non-Compete Agreement?
In Long Island’s competitive business environment, non-compete agreements can be a critical tool for employers. A non-compete is a contract that prevents a partner or employee from working for a competitor or starting a new competing company for a certain period of time after parting ways with their employer. These agreements can also include terms that prohibit the disclosure of a company’s confidential information, such as marketing strategies, customer lists, and exclusive formulas.
Importantly, by restricting the activities that are off-limits to former partners and employees who had access to proprietary information, non-competes help businesses maintain their competitive advantage. In companies where customer loyalty is paramount, non-competes can help ensure former employees service customers after their departure.
Are Non-Compete Agreements Enforceable?
Reasonable non-compete agreements are legally enforceable in New York. However, it’s important to note that these agreements are generally disfavored by courts and must meet strict criteria. A court will consider the employer’s legitimate business interests, an employee’s job duties, and the language of the agreement. Courts will also analyze four distinct factors to determine whether a non-compete agreement should be enforced.
A non-compete agreement will usually be enforced in New York if it:
- Is necessary to protect the employer’s legitimate business interests — An employer must demonstrate that there is a valid reason for the restriction, such as protecting trade secrets or confidential information learned during employment.
- Does not impose an undue hardship on the employee — An enforceable non-compete agreement must not impose overly broad restrictions that impact the employee’s ability to earn a living.
- Does not harm the public — A non-compete must not harm the public interest. For example, it must not restrict access to essential services or stifle the development of new technologies.
- Is reasonable in its duration and geographic scope — It’s vital to ensure that the time frame and geographic limitations of the non-compete are reasonable based on the field of business.
A court may still require an employee to comply with certain terms of a non-compete agreement, even if it finds that some conditions are unreasonable. For instance, if a judge determines the length of time is too long or the geographic scope is too broad, these provisions may be limited. In these cases, the court may invalidate the entire agreement, or enforce it for a shorter duration or smaller geographical area.
Are There Alternatives to Non-Compete Agreements?
Although they are generally enforceable as long as they are reasonable, non-compete agreements are increasingly scrutinized. In order to avoid any potential challenges that could arise from the use of a non-compete, Long Island business owners might consider protecting their confidential information with a non-solicitation agreement or a non-disclosure agreement (NDA). While a non-solicitation agreement prevents employees from poaching clients, customers, and co-workers after leaving a job, it does not restrict their ability to work in the same industry.
Similarly, a non-disclosure agreement can protect a company’s confidential information without restricting the former employee’s future employment opportunities. It’s best to discuss what options are best to safeguard your company with a knowledgeable Long Island business attorney.
Contact an Experienced Long Island Business Attorney
If you are considering using non-compete agreements in your Long Island business, it’s essential to have the guidance of a skillful business attorney. At Barnes & Barnes, P.C., we handle a wide range of business matters, including drafting, reviewing, and litigating non-compete agreements. Contact us at (516) 673-0674 to schedule a consultation.
