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Restrictive Covenants & Reasonableness Elements

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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.  Generally speaking, restrictive covenants will be enforced when they meet the following requirements: (1) they are necessary to protect a former employer’s legitimate interest; (2) they are reasonable in duration and geographic scope; (3) they are not unreasonably burdensome on the employee; and (4) they are not harmful to the general public.[1] These requirements are known as the reasonableness elements. If a restrictive covenant does not meet all of these elements it will be deemed unreasonable, and thus unenforceable by a New York court.

Protecting a Legitimate Interest of the Employer

            New York courts typically find a legitimate interest present when protection of trade secrets or other confidential materials is necessary to prevent unfair competition, and when the former employee has access and knowledge of these materials.[2] New York courts have historically protected this kind of information, which could include client lists, business plans and strategies, and accounting or financial information, as well as proprietary formulas, data, and methods.[3] A legitimate interest may also be found where the restricted employee has unique knowledge which, if brought to a competitor, would constitute unfair competition.

1. Trade Secrets and Confidential Material

The protection of trade secrets and confidential material is reasonable so long as the information is not publicly available.[4] What is a trade secret? The law defines a trade secret as any business information that an employer has taken reasonable efforts to keep secret from the public and its competitors, and that has economic value.[5] Courts have also held, however, that an employee’s mere recollection of business information is not confidential and that an employer must go through more extensive lengths to protect information for it to be deemed confidential.[6] Customer lists are generally deemed to be trade secrets so long as an employer has spent a considerable amount of time and resources in compiling the list and obtaining the clients, and so long as the customer list is not easily discoverable through public means.[7] If the information meets the requirements above, it will likely be considered a trade secret or confidential and thus can be protected by an enforceable restrictive covenant.

2. Employees with Unique or Extraordinary Services or Skills

If the former employee possesses skills that are unique or extraordinary, a restrictive covenant may still be enforced to ensure that said employee does not work for a competitor.[8] For a former employee to be deemed to have unique or extraordinary skills where the employer bears a substantial risk in losing all or part of its business and specifically its customers if the former employee were to join another business, it must also be shown that such business will be diverted to the employee’s new employer.[9] [10] Other such factors included in this consideration are whether the employee is highly compensated, and that special skills and training were needed for their job.[11] A valuable and efficient worker is not enough for the court to enforce a restrictive covenant, the employee must meet the higher standard.

Duration and Geographic Scope

If a court finds that the employer had a legitimate interest in enforcing a restrictive covenant, they will then turn to see whether such restrictions are reasonable in relation to duration and geographic parameters. This element examines the length of time for which the restriction will be enforced, and in what geographic areas. Courts have held that such restrictions must only extend to the point which they protect the employer’s legitimate interest and no further. The current trend is to do away with a geographic restriction in favor of a restriction on specific clients or client categories.

1. Duration

There is no exact science as to what duration will be deemed reasonable by the court. Oftentimes, it depends on industry standards and the kind information or skill a former employee may possess.[12] Generally, in New York, time limitations of up to one (1) year have been held to be enforceable. To protect potentially valuable trade secrets and confidential business information, courts will enforce restrictive covenants for a specific period in which the legitimate interests of an employer can be achieved.[13] Such a period of time is reasonable so long as the protectable knowledge possessed by the former employee would be relevant and competitively valuable to a competitor.[14]

2. Geographic Scope

Just like duration, determining the reasonableness of the geographic scope covered by a restrictive covenant is no exact science, and it depends on a number of factors. If the area covered coincides with the location of the former employer’s customers or clients, for instance, a covenant is likely to be deemed reasonable.[15] This can even extend nationwide, as New York courts have found that in some cases where a company conducts business on a national scale, such restrictive covenants can apply across the country.[16]

Unreasonably Burdensome to the Former Employee

To remain enforceable, a restrictive covenant must not place an unreasonable burden on the former employee.[17] If the restrictive covenant substantially interferes with a former employee’s ability and right to earn a living for themselves and their families, a court will generally look at the covenant with close scrutiny.[18] Covenants that prohibit a former employee from engaging in the same or a similar profession for a long period of time over a wide geographic area are generally going to be met with resistance in New York courts. If too restrictive, such restrictive covenants may be unenforceable.

Public Policy Considerations

Lastly, restrictive covenants must be reasonable so as to not result in harm to the general public.[19] Courts have found that the public has an interest in promoting economic competition.[20] The general public benefits from the skills and innovation of a movable workforce and from former employees who start their own businesses.[21] The State and Federal governments, in particular, have an interest in keeping their citizens employed and productive so they can maximize tax revenue.

Restrictive covenants are not a one-size-fits-all type of document.  Employers should take the time to evaluate what is appropriate for their business in their industry and geographic location.  An experienced labor & employment attorney will properly examine all the applicable aspects in order to draft a legally sound restrictive covenant that can withstand a challenge in court. For help navigating restrictive covenants and drafting employment agreements and restrictive covenants, contact KI Legal’s knowledgeable labor & employment attorneys by calling (646) 766-8308 or emailing

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

[2] See Sutherland Global Servs. Inc. v. Steuewe, 902 N.Y.S.2d 272, 274 (N.Y. App. Div. 2010).

[3] Bowie 2022.

[4] Id.

[5] See Defend Trade Secret Act of 2016, 18 U.S.C. §1839(3).

[6] Fareportal, Inc. v. Ware, No. 653995/16, 2018 WL 4080128 (N.Y. Sup. Ct. Aug. 23, 2018)

[7] See Reed, Roberts Assocs., Inc. v. Strauman, 40 N.Y.2d 303, 353 N.E.2d 590 (1976).

[8] Bowie 2022.

[9] Id.

[10] See BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 712 N.E.2d 1220, 1224-25 (1999).

[11] Bowie 2022.

[12] Id.

[13] Id.

[14] Id.

[15] Id.

[16] Innovative Networks, Inc. v. Satellite Airlines Ticketing Centers, Inc., 871 F. Supp. 709 (S.D.N.Y. 1995).

[17] Bowie 2022.

[18] Id.

[19] Id.

[20] Id.

[21] Id.



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