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Contract Law · 11 Min Read

Non-Compete Agreements in New York: What Is Enforceable?

New York non-competes require a case-specific review of the restriction, the business interest it protects, and the effect on the person bound by it. Proposed legislation is not the same as an enacted ban. As of October 4, 2026, the official record for Senate Bill S4641A shows it in the Assembly Labor Committee, not enacted.

This guide explains the current enforceability framework, the proposal's main terms, and what business owners should review before signing, enforcing, or challenging a restriction.

The Current Standard — What Courts Actually Enforce

Common-law decisions govern many New York employment non-competes, but statutory and professional restrictions also matter. For example, Labor Law § 202-k prohibits covered broadcasting employers from imposing post-employment non-competes on covered broadcast employees, excluding management.

The governing framework comes from the Court of Appeals' decision in BDO Seidman v. Hirshberg (93 N.Y.2d 382, 1999). Its reasonableness analysis includes these requirements:

BDO Seidman Enforceability Test
A Non-Compete Is Enforceable Only If It:
  1. Is necessary to protect a legitimate business interest
  2. Does not impose an undue hardship on the employee
  3. Does not harm the public
  4. Is reasonable in time and geographic scope

A restriction that exceeds these limits may be unenforceable as written. A court may sometimes enforce a narrower portion, but partial enforcement is discretionary and depends on the facts, including whether the employer overreached.

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.

Restriction Analysis
Scope Matters. Enforceability Depends on the Facts.
EnforceableContestedStruck Down
Client Non-Solicitation Only
Narrower than a work ban, but the clients covered and the protected interest still matter.
Industry-Specific, 6 Months
Narrow scope + short duration. Likely enforceable if tied to trade secrets.
Metro-Area, 1–2 Years
Fact-dependent. Courts scrutinize whether geographic scope matches the employer's footprint.
Nationwide, 3+ Years
Broad restraints face close scrutiny. The business context and interest protected remain important.
Courts apply the BDO Seidman four-part test at every point on this spectrum.

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.

Consideration requires a closer look. Continued at-will employment can provide consideration for a restrictive covenant in New York; a separate raise or promotion is not always required. Adequate consideration does not, by itself, make an overbroad restriction enforceable.

Termination without cause matters, but is not a universal release. The result depends on the covenant, the circumstances of termination, and the relief sought. The employee-choice doctrine governing forfeiture of benefits differs from an ordinary claim to enforce a restrictive covenant; a dismissal without cause should not be treated as automatically voiding every restriction.

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.

Practice Tip

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

The Senate passed S4641A on June 9, 2025. Checked October 4, 2026, its official status remains in the Assembly Labor Committee. The proposal is not law; Senate passage alone does not create a statewide ban.

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.

S4641A — Key Provisions If Enacted
Coverage
Bans non-competes for all "covered individuals" earning less than $500,000/year (averaged over 3 most recent W-2 or K-1 statements)
Healthcare
Bans non-competes for all health-related professionals regardless of income — physicians, dentists, nurses, pharmacists, psychologists, physical therapists
High Earners
Exempts individuals earning $500K+ annually; their non-competes capped at one year with continued salary payments required
Business Sales
Carves out qualifying sales of goodwill or a majority ownership interest involving an owner with at least a 15% interest; not every minority-stake sale qualifies
Preserved
Client non-solicitation, confidentiality, trade-secret protections, and fixed-term service or exclusivity, provided they do not otherwise violate the proposed restrictions
Enforcement
Two-year action period measured from specified triggering events; available relief includes lost compensation, attorney's fees, and up to $10,000 in liquidated damages per covered individual or health-related professional
Scope
Prospective only — existing non-competes stay under current common-law standard unless modified after effective date

The proposal would also restrict choice-of-law and venue clauses used to avoid its protections for covered individuals with the specified New York connection during the 30 days immediately before employment ends, including certain remote workers. Its one-year limit and salary-payment requirement are proposed terms, not current statewide rules.

What to Check Before Relying on a Ban

Check the official bill history and enacted text, not predictions about passage. A proposal may change before enactment, and its exceptions and effective date determine which agreements it reaches.

S4641A's current text would generally apply to agreements entered into or modified on or after an effective date 30 days after enactment. That date has not been triggered by this proposal, and an existing restriction should not be ignored merely because a ban has been proposed.

The federal position is separate: the FTC states that its nationwide Noncompete Rule is not in effect and is not enforceable. That does not make every restriction lawful; state law and other applicable protections still require review.

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

Review the agreement under the law that applies now, while keeping proposed changes separate from current obligations.

If you're an employer relying on non-competes: identify the interest each restriction protects, check its scope and duration, and consider whether narrower client non-solicitation or confidentiality terms would suffice. Do not treat the proposed $500,000 threshold as current law.

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: a covenant protecting purchased goodwill is assessed differently from an ordinary employment restriction, but must still be reasonable. The proposed bill's sale exception has specific transaction and ownership conditions; do not assume every ownership transfer qualifies.

Non-Competes in the Business Formation Context

Address departure restrictions when negotiating an operating or shareholders' agreement, before a dispute develops. Ownership status alone does not make a covenant enforceable. Courts examine the transaction, bargaining circumstances, goodwill and interests protected; a partner's departure is not automatically equivalent to a sale of the business.

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.

New York's Non-Compete Landscape Is Shifting Fast

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.

Frequently Asked Questions

Non-Compete Agreements in New York

Enforceability Basics
Pending Legislation
Practical Considerations
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