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New York Caselaw Governing the Enforcement of Restrictive Covenants

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Restrictive Covenants – typically Non-Competition or Non-Solicitation clauses in employment contracts – are a binding agreement between the employer and the employee that is meant to prevent unfair competition by limiting the employee’s job or business activities after their employment ends. In New York State, there is currently no statute that prohibits restrictive covenants between employers and employees and or limits them in any way.[1] Instead, there is a robust set of decisions and caselaw – aka law that is based on precedents from prior cases rather than based on constitutions statutes, and/or regulations – which has been developed through New York courts. The standard which courts look to govern all restrictive covenants in New York is the reasonableness standard. New York State’s highest court, the Court of Appeals, laid out the standard in the seminal case of BDO Seidman v. Hirshberg.[2] The Court found that a restrictive covenant will be found reasonable if it: (1) “is no greater than is required for the protection of a legitimate interest of the employer,” (2) “does not impose undue hardship on the employee,” and (3) does not injure the public.[3]

Legitimate Interests

In order for a court to enforce a restrictive covenant, it must first determine if the covenant is necessary to protect a legitimate interest. The court in 1 Model Mgmt., LLC v. Kavoussi, found that misappropriation of trade secrets, confidential information, and protection from competition by a former employee who has unique and extraordinary skills and abilities, are all considered to be legitimate interests of an employer that are worth protecting.[4] If there is no legitimate interest to be protected, i.e., the restriction seeks to limit fair competition, not unfair competition, the court will not enforce the restrictive covenant.[5] If there is a legitimate interest to be protected, the court will look to the whether the restrictive covenants is “reasonable in time and area.”[6]

This means that restrictive covenants will only be enforceable for a limited amount of time (ex: 1 year), and for a limited geographic area (ex: a 10 mile radius surrounding the former employer’s place of business). There is no hard and fast rule in New York as to what is considered to be reasonable in scope. Oftentimes it depends on a variety of factors such as the city or town in which the business is located and the common practices of the industry.

For example, in New York City, it is extremely difficult to enforce a noncompete agreement upon an employee of a fast-food restaurant chain as the work generally does not require extraordinary skill. A cashier or fry cook generally does not have a unique skill that an employer can protect, nor do they likely possess any important trade secrets or confidential information that they could bring over to a new employer. Conversely, the Court of Appeals also held that in jobs where a former employee might hold a list of important clientele and their needs, such as a salesman, it may be permissible to enforce a restrictive covenant so long as it is reasonable, fair, and not[7]

Undue Hardship and Burden

The second aspect a court will analyze when evaluating a restrictive covenant is whether the covenant places an undue hardship or burden on the employee.[8] A former employee’s livelihood and ability to provide for oneself and family is the most important factor in determining whether an employee will face an undue hardship.[9] It is the general policy of New York courts to avoid restricting a former employee’s right to work as much as reasonably possible.

Public Policy

Lastly, the court will examine the extent to which the restrictive covenant limits fair competition. As a matter of public policy, courts look to preserve fair competition, and limit unfair competition. In Ashland Mgmt. Inc. v. Altair Invs. N.A., LLC, the court outlined that both the court and the public have an interest in “robust and uninhibited competition.”[10] The major issue courts have with restrictive covenants is their potential stifling of fair competition and competitive wages. Accordingly, to be enforced by New York Courts, the covenants must take the least restrictive means possible so as to not harm economic competitiveness between businesses.[11] Courts are far more likely, as a matter of public policy, to uphold restrictive covenants when they are vital to protecting valuable information, such a trade secrets, since preservation of trade secrets promotes competition in the marketplace – they give the secret holder an earned competitive edge worthy of protection.[12] However, when such restrictions do little to no good for the public good in that context, such as restricting the economic movement of employees, they are far less likely to be enforced.

For help navigating restrictive covenants and drafting employment agreements, contact the knowledgeable labor & employment attorneys at KI Legal by calling (646) 766-8308 or emailing

[1] M. Alexander Bowie, 2022 in New York Business Litigation 329–378 (2022).

[2] BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 712 N.E.2d 1220 (1999).

[3] Id.

[4] 1 Model Mgmt., LLC v. Kavoussi, 82 A.D.3d 502, 918 N.Y.S.2d 431 (2011).

[5] Id.

[6] Id.

[7] See Reed, Roberts Assoc. v. Strauman, 40 N.Y.2d 303, 308, 386 N.Y.S.2d 677, 353 N.E.2d 590 [1976]; BDO Seidman, 93 N.Y.2d at 389, 690 N.Y.S.2d 854, 712 N.E.2d 1220).

[8] See BDO Seidman at 393.

[9] See Bowie, 2022.

[10] Ashland Mgmt. Inc. v. Altair Invs. NA, LLC, 59 A.D.3d 97, 104, 869 N.Y.S.2d 465, 471 (2008), aff’d as modified, 14 N.Y.3d 774, 925 N.E.2d 581 (2010).

[11] Id.

[12] Id.



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