Non-Compete Agreements in New York: What's Enforceable in 2026
New York's non-compete law is in a state of controlled demolition. The rules that governed these agreements for the past two decades are still technically on the books — but the New York State Senate passed a bill in June 2025 that would gut most of them. Whether you're an employer relying on non-competes to protect client relationships or a business owner who signed one and wants out, the window to act is narrow and the stakes are real.
Here's what the law actually says right now, what's about to change, and what you should be doing about it.
The Current Standard — What Courts Actually Enforce
New York has never had a statute specifically authorizing or prohibiting non-compete agreements. Instead, enforceability has been governed entirely by court decisions — and courts have been skeptical of these restrictions for a long time.
The governing framework comes from the Court of Appeals' decision in BDO Seidman v. Hirshberg (93 N.Y.2d 382, 1999), which established a four-part test:
- Is necessary to protect a legitimate business interest
- Does not impose an undue hardship on the employee
- Does not harm the public
- Is reasonable in time and geographic scope
That test sounds balanced, but in practice, New York courts apply it aggressively against employers. A non-compete that fails even one prong gets thrown out — and judges frequently find reasons to throw them out.
What counts as a "legitimate business interest"? Courts have recognized a short list: protecting trade secrets and confidential information, preventing the misappropriation of client goodwill built at the employer's expense, and retaining employees whose services are truly unique or extraordinary. Wanting to prevent generic competition doesn't make the cut.
How high is the "unique or extraordinary" bar? In Multiplier Inc. v. Moreno, the Manhattan Commercial Division refused to enforce a non-compete where the employer couldn't show the departing employee was irreplaceable. The fact that an employee is talented isn't enough — they have to be genuinely irreplaceable in a way the employer can prove.
Where Non-Competes Routinely Fail
Courts in Brooklyn, Queens, Manhattan, and Staten Island regularly strike down non-competes for the same recurring problems.
Overbroad geographic scope is the most common deficiency. A non-compete barring a departing employee from working anywhere in the country — or even anywhere in the metro area — is likely to be found unreasonable unless the employer's competitive footprint genuinely extends that far.
Excessive duration draws similar scrutiny. Non-competes lasting two years or more face strong headwinds, and even one-year restrictions get challenged successfully when the employer can't articulate a specific interest requiring that protection.
No new consideration is another killer. When an employer presents a non-compete to a current employee without offering anything in return — no raise, no promotion — courts question whether the agreement is supported by adequate consideration.
Fired employees present perhaps the sharpest problem. New York courts have consistently found that enforcing a non-compete against an employee terminated without cause is unreasonable. An employer can't cut someone loose and then prevent them from earning a living.
What's Still Enforceable — Even Without a Non-Compete
Even when a non-compete fails, employers aren't left unprotected. New York courts generally enforce three types of restrictions more readily:
Non-solicitation clauses prevent a departing employee from actively recruiting the employer's clients or other employees. Because they're narrower — they restrict who you can contact, not where you can work — courts view them more favorably.
Non-disclosure and confidentiality agreements protect trade secrets and proprietary information. These are the most consistently enforced restrictive covenants because they protect a clear, recognized interest without broadly restricting employment.
Non-compete agreements in the context of a business sale receive the most favorable treatment. When someone sells their ownership stake, courts give wide latitude because the buyer is paying for the business's goodwill.
For most New York businesses, a well-drafted non-solicitation agreement paired with a strong confidentiality clause provides more reliable protection than a broad non-compete — and at lower litigation risk.
The Pending Ban — Senate Bill S4641A
On June 9, 2025, the New York State Senate passed Senate Bill S4641A, which would amend the Labor Law to prohibit most non-compete agreements going forward. The bill is currently before the Assembly, and if it passes both chambers, it heads to Governor Hochul's desk.
This isn't the first attempt. In 2023, the legislature passed a blanket ban (S3100-A), but Governor Hochul vetoed it in December 2023, saying she preferred a more balanced approach with income-based exceptions. S4641A appears designed to address those concerns.
The bill also blocks employers from circumventing restrictions through choice-of-law provisions. If an employee lived or worked in New York for at least 30 days before their employment ended — including remote workers reporting to a New York supervisor — the New York ban would apply regardless of what state's law the agreement selects.
Will the Governor Sign It This Time?
That's the question every New York employment attorney is trying to answer. Governor Hochul's 2023 veto memo specifically requested a bill that carved out high earners, and S4641A does exactly that with its $500,000 threshold. The business sale exemption also tracks what she asked for.
But there's a gap between what the governor requested and what the bill delivers. Hochul indicated she'd support a ban for workers earning below the median wage — roughly $60,000 per year. S4641A covers workers earning up to $500,000, which is dramatically broader. Whether the governor views the $500,000 threshold as a reasonable compromise or an overreach remains to be seen.
The bill's trajectory through the Assembly and any subsequent negotiations with the governor's office will determine whether New York joins California, Minnesota, North Dakota, and Oklahoma in broadly restricting non-competes, or whether another veto sends lawmakers back to the drawing board.
Dealing with a non-compete issue in New York — enforcing one, challenging one, or drafting a new agreement? Call KLG Law at (212) 203-2082 for a case evaluation.
What Business Owners Should Do Right Now
Whether you use non-competes or are bound by one, the uncertain legislative environment demands action.
If you're an employer relying on non-competes: audit every existing agreement. Identify which ones would survive S4641A and which wouldn't. For employees earning under $500,000, start drafting non-solicitation and confidentiality agreements as alternatives now — don't wait for the bill to become law and then scramble.
If you're a business owner bound by a non-compete: don't assume it's enforceable just because you signed it. The four-part BDO Seidman test sets a high bar, and many non-competes signed by small business owners and mid-level employees don't survive judicial scrutiny. Have the agreement reviewed by an attorney who handles contract disputes — the analysis is fact-specific.
If you're buying or selling a business: the sale-of-business exemption in both current law and the pending bill means non-competes remain viable in this context. But they still must be reasonable. A restriction that's too broad in duration or geography can be partially enforced — or thrown out entirely if the court finds the employer acted in bad faith.
Non-Competes in the Business Formation Context
The smartest time to address non-compete issues is before disputes arise — at the formation stage. When founding partners establish an LLC or corporation, the operating agreement or shareholders' agreement should address what happens when a member or officer departs. New York courts treat restrictions between co-owners differently than employer-employee non-competes, giving broader latitude to agreements between business partners who negotiated at arm's length.
For businesses across Brooklyn, Queens, Manhattan, and Staten Island, building proper formation documents with well-crafted restrictive covenants from the outset can prevent the kind of ugly departure disputes that end up in Kings County or Queens County Supreme Court.
Whether you're an employer looking to protect your business or a business owner trying to understand an agreement you signed, KLG Law helps clients in Brooklyn, Queens, Manhattan, and Staten Island with practical, current legal guidance on restrictive covenants.
Call (212) 203-2082 or visit our contract law practice page.