A non-compete clause is a contractual restriction that prevents a former employee, partner, or business owner from competing in a specific market or for a specific period. In New York, these agreements are only enforceable when they protect legitimate business interests and are reasonably limited in scope. When a dispute arises, litigation often centers on whether the restriction is fair, necessary, and enforceable under state law.
When a Non-Compete Clause Can Be Enforced
Enforcing a non-compete in New York requires showing that the restriction is both reasonable and essential to protect the business’s interests. Courts weigh several factors when determining enforceability:
- Legitimate purpose: Protecting trade secrets, confidential information, or customer relationships.
- Scope and duration: The restriction must be limited to what’s needed to safeguard those interests.
- Fairness to the employee: The agreement cannot impose undue hardship or block a person from earning a living.
- Public policy: Courts reject restrictions that harm competition or the public interest.
If these elements are met, a business may pursue injunctive relief, a court order that immediately stops the violating party from competing while the case proceeds.
Litigation Strategies for Employers
For employers or business owners, the key to enforcing a non-compete is swift and strategic action. Delays can weaken claims and suggest that the restriction is not vital. Common litigation steps include:
- Filing for a temporary restraining order (TRO): This can prevent further harm while the court evaluates the merits of the case.
- Proving breach and damages: Businesses must show that the other party violated the clause and caused financial loss.
- Demonstrating reasonableness: Employers should be prepared to justify the geographic scope and duration with clear business evidence.
- Seeking tailored remedies: Courts can issue injunctions, award damages, or modify overly broad terms to make them enforceable.
Successful enforcement often depends on having precise, well-drafted agreements supported by documented business rationale.
Defending Against a Non-Compete Claim
Individuals and business partners facing enforcement actions have strong defenses under New York law. Common litigation strategies include:
- Challenging reasonableness: Arguing that the restriction is broader than necessary or covers unrelated industries or territories.
- Questioning consideration: Claiming the agreement was signed without fair value, such as new employment or compensation.
- Asserting public policy protections: Demonstrating that enforcement would unfairly limit competition or deprive the public of a service.
- Showing lack of legitimate interest: Proving that the employer has no real trade secrets or client relationships at risk.
Courts often modify or void overly restrictive covenants, especially when they appear punitive rather than protective.
Non-Compete Disputes in Business Sales and Partnerships
Non-compete clauses are also common in the sale of a business or the breakup of a professional partnership. In these cases, New York courts apply a different standard—restrictions tied to the sale of goodwill are more likely to be enforced, since the buyer has paid for the right to operate without the seller’s competition.
However, even in partnership or ownership disputes, enforcement depends on reasonableness. A restriction that extends beyond the business’s market area or lasts too long can still be struck down. When partners disagree about enforcement or compliance, litigation may be necessary to clarify each party’s rights and obligations.
Alternatives to Litigation
Although non-compete disputes often reach court, many can be resolved through negotiation or mediation. Settlement discussions allow parties to modify terms, agree to limited restrictions, or exchange compensation for compliance. For ongoing businesses, a negotiated outcome may preserve relationships and prevent reputational harm that can accompany public lawsuits.
Still, when negotiations fail, litigation provides the legal framework to protect proprietary information and enforce contractual rights.
Protect Your Rights in a Non-Compete Dispute
When a non-compete dispute threatens your business or career, experienced legal representation is essential. At Kohan Law Group, we handle non-compete disputes with a clear understanding of both business realities and New York litigation standards. Our attorneys represent employers, professionals, and business partners in cases involving restrictive covenants, unfair competition, and breach of fiduciary duty.Â
Contact us today to discuss your case. Our attorneys will evaluate the contract, assess your options, and take decisive action to protect your interests in and out of court.