Non-Competes and Restrictive Covenants

Did New York ban non-competes?

No. Here is the position, dated, so that it can be quoted later without misleading anyone.

Status as of 27 August 2026 Non-compete agreements remain lawful and enforceable in New York, subject to a common-law reasonableness test applied case by case. There is no New York statute banning them for employees generally, and there is no federal rule banning them. The Federal Trade Commission’s Non-Compete Clause Rule never took effect: a federal court held it unlawful and set it aside in August 2024, the FTC dropped its appeals in September 2025, and the rule was removed from the Code of Federal Regulations on 12 February 2026. A New York bill that would prohibit most non-competes, Senate Bill S9759, passed the State Senate 40 to 21 on 3 June 2026 and was referred to the Assembly Labor Committee, where the Senate’s bill record showed no further action as of 27 August 2026. It is not law, and as drafted it would apply only to contracts entered into or modified after it took effect, with no retroactive effect on agreements already signed. Any source stating that New York or the federal government has banned non-competes is describing something that has not happened. This page states the law as of 27 August 2026 and is dated again whenever that changes.

That is the whole of what is verified. Everything else about the New York bill is a forecast, and this page will not dress a forecast up as a rule.

So the useful question is not whether non-competes are banned. It is whether this one, drafted the way it was drafted, is enforceable against you. And if you are an executive, the document that will cost you the most money is probably not the non-compete at all. It is a forfeiture clause in an equity or deferred compensation plan you have never read.

What happened to the FTC non-compete rule?

It was struck down before it applied to anyone, and it is now formally off the books. The Commission adopted the rule in 2024, scheduled to take effect that September. On 20 August 2024, in Ryan, LLC v. Federal Trade Commission, the United States District Court for the Northern District of Texas held that the FTC lacked statutory authority to issue it and set it aside. The FTC appealed, then on 5 September 2025 announced it had voted 3 to 1 to dismiss its appeals and accede to the vacatur. On 12 February 2026 it removed the rule from the Code of Federal Regulations.

FTC enforcement against individual employers under the antitrust laws did not stop. In November 2025 it ordered a pet cremation company to stop enforcing non-competes against roughly 1,800 workers, and on 15 April 2026 a national pest-control company to stop enforcing them against more than 18,000, with warning letters to thirteen other firms in that industry. Those orders bind the companies named and do not void your agreement, but rank-and-file non-competes now draw regulatory attention, and opposing counsel knows it.

What does New York require before a non-compete is enforced?

New York applies a judge-made reasonableness test rather than a statute. A covenant is enforceable only to the extent it satisfies each of the following, and failing any one defeats it as written.

• It protects a legitimate employer interest New York describes these narrowly: trade secrets and confidential customer information, client relationships the employer developed at its own expense, and, where it genuinely applies, an employee whose services are unique or extraordinary. Preventing ordinary competition is not itself a legitimate interest.
• It is no greater than necessary, and reasonable in duration and geography There is no magic number, but a five-state restriction protecting a two-county book of business is not tailored, whatever else it is.
• It does not impose undue hardship on you Courts weigh the loss of a livelihood, more heavily where the clause forecloses your whole field.
• It is not injurious to the public Often nominal, but not in health care, where it becomes a question about patient access.

Two consequences matter more than the framework itself.

Your general skill and knowledge are yours In Reed, Roberts Associates v. Strauman, New York’s Court of Appeals held that, absent trade secrets or wrongful conduct, a departing employee cannot be enjoined from using the general knowledge and skills acquired in employment. Employers routinely draft as though the opposite were true.

Clients you brought in are treated differently from clients you were handed In BDO Seidman v. Hirshberg the Court of Appeals held that an employer’s protectable interest runs to client relationships the employee acquired through work performed for the employer, not to clients the employee independently recruited or brought to the firm. If a meaningful share of your book followed you in the door, document that now rather than reconstructing it later.

One point cuts the other way. BDO Seidman also approved partial enforcement, narrowing an over-wide covenant rather than voiding it, so the common assumption that an obviously excessive clause is therefore worthless is not safe.

What are the four documents people call “a non-compete”?

Almost every dispute begins with one word used for four instruments that are enforced very differently.

Two others sit alongside these: a notice or fixed-term provision, sometimes marketed as garden leave, which keeps you employed and paid rather than restricting you afterwards; and a covenant given as part of the sale of a business, where you sold goodwill and were paid for it, which is treated more favorably to the buyer than an employment covenant.

The pending Senate bill would prohibit non-competes while expressly preserving the other three clauses in the table. A world without non-competes is not a world without restrictive covenants. It is one where those clauses do all the work, which is a reason to read them closely today.

What should you do before you sign one?

The most valuable work happens before your signature is on the page, while the employer still wants something from you.

1. Ask for the document before you resign your current job The worst position is having already quit somewhere else when the agreement appears.
2. Read the definitions, not the headline “Competitor” meaning any company in your industry is a different clause from one naming six companies. “Any capacity” differs from “the same or substantially similar role.” “Anywhere the company does business” differs from a radius around your office.
3. Ask for a termination carve-out if one is absent A sentence providing that the restrictions lapse if the company terminates you other than for cause is the most valuable single edit available, and employers grant it more often than employees expect, because it costs nothing unless they fire you.
4. Check the choice-of-law and forum clauses An employer may specify a state whose courts favor employers and a forum far from where you live.
5. Read the equity and deferred compensation documents, not just the offer letter Forfeiture language is almost never in the employment agreement.
6. Ask for a carve-out for what you actually intend to do A named list of permitted employers or an excluded client segment is easier to agree than an abstract argument about reasonableness. Get every change in writing and signed: a recruiter’s assurance that “we never enforce those” is worth nothing later.

What should you do after a threat letter arrives?

A cease-and-desist letter is engineered to make you act quickly and alone. Do the opposite.

1. Do not answer it yourself Anything you write becomes an exhibit, including a denial that turns out to be imprecise.
2. Do not delete anything Destroying material after a demand letter is a separate and far worse problem than the underlying dispute, and it converts an arguable case into an indefensible one.
3. Return company property and document that you did Retaining company files, client lists, or pricing sheets is the most common way a strong position becomes a weak one. Confirm in writing what you returned and when.
4. Tell your new employer what you have and what you signed Hearing it from you is survivable. Hearing it from opposing counsel frequently is not.
5. Pause client outreach until someone has read the actual agreement, and gather the paper: every version of the signed agreement, the offer letter, the handbook, the plan and award documents, and the separation papers.
6. Treat the timeline as weeks An employer seeking a preliminary injunction must generally show likelihood of success, irreparable harm, and that the equities favor it, and its own delay undercuts that urgency, which is why these letters arrive fast and demand a fast answer.
7. Do not sign a standstill or undertaking without advice Agreeing “just for now” not to contact anyone can concede the point in dispute.

Put a number on what you stand to lose as well: unvested equity, deferred compensation, an exercise window, an unpaid bonus, a clawback. Our deadlines guide covers how other employment claims run alongside a covenant dispute, and what to do before signing a severance agreement the case where the covenant sits inside an exit package.

Where is the money for executives? Forfeiture for competition.

This is the part of the subject almost nobody writes about plainly, and it is where senior employees lose the largest sums.

A forfeiture-for-competition provision does not forbid you from competing. It puts a price on competing. It lives in an equity award agreement, a long-term incentive plan, a deferred compensation plan, a partnership agreement, or a bonus clawback, and says some version of: if you go to a competitor, unvested units and options are cancelled, deferred amounts are forfeited, the exercise window closes, or a bonus already paid becomes repayable.

Three features make it more dangerous than an ordinary non-compete.

The burden is flipped To enforce a non-compete, the employer must sue you and persuade a court to restrain you. To enforce a forfeiture, it does nothing at all. It simply does not pay. If you disagree, you are the plaintiff, funding a case against a company already holding your money.

It can be enforced where an injunction would fail Under New York’s employee choice doctrine, where an employee is given a genuine choice between keeping a benefit and competing, courts have enforced the forfeiture without applying the reasonableness scrutiny that governs injunctive relief. That is the doctrine’s whole logic: you were not restrained, you chose. So a covenant a court would never enforce by injunction can still cost seven figures.

It sits in documents you were never really asked to read The employment agreement gets negotiated. The plan documents get incorporated by reference.

The limits turn on how you left. In Post v. Merrill Lynch, Pierce, Fenner & Smith, the New York Court of Appeals considered account executives dismissed without cause who went to a competitor and were told they had forfeited earned pension benefits. The Court held the forfeiture could not stand: where the employer ends the relationship without cause, it destroys the mutuality on which the covenant rests and cannot also impose a forfeiture. If you were laid off rather than resigning, establish that first. Morris v. Schroder Capital Management International is the other side of the line: an employee who resigns and argues the departure was really involuntary must meet the constructive discharge standard, and dissatisfaction with reduced responsibilities was held not to meet it. How your departure is characterized, and what you put in writing at the time, can be worth more than any argument about the covenant itself.

Whether an injunction survives a without-cause termination is a separate and genuinely unsettled question, on which New York’s Appellate Division departments have divided and the Court of Appeals has not ruled. Suffolk and Nassau appeals go to the Second Department, whose decisions have treated a without-cause termination as defeating enforcement, but this is contested law rather than a rule to rely on.

One further point is frequently misunderstood. Whether a withheld amount counts as wages under the New York Labor Law matters, because wage claims carry liquidated damages and attorneys’ fees that a contract claim does not. In Truelove v. Northeast Capital & Advisory, the Court of Appeals held that bonus payments depending on the employer’s overall financial success and subject to its discretion were not wages under Labor Law article 6. Earned commissions tied to your own production are treated differently. The answer turns on how the plan is written, so it should be analyzed rather than assumed. See unpaid commissions and unlawful deductions.

So: get the plan documents, identify every vesting date and trigger, find out what “cause” and “competitor” mean in the document that governs, and treat the forfeiture as a negotiable line item at separation. Our severance agreement review page covers the rest of that document, and wrongful termination the case where the stated reason was not the real one.

What about physicians, nurses, and other clinicians?

Health care is the largest employment sector on Long Island, and the one where restrictive covenants create the sharpest personal problems, because a clinician’s practice is tied to a patient population that does not move easily.

Today, New York has no statute specifically governing non-competes for physicians, nurses, or other licensed clinicians. They are analyzed under the same reasonableness test as everyone else. What differs is emphasis: the public-interest prong, often a formality in commercial cases, has real content here because it raises patient access and continuity of care. And the covenant that actually constrains a clinician is frequently not the geographic bar but the patient or referral-source non-solicitation, narrower on paper and far more restrictive in practice. A radius measured from “any office or facility of the practice” also behaves very differently for a single-site practice than for a hospital system spanning two counties, where identical words can amount to an island-wide exclusion.

If the pending bill were enacted as drafted, health related professionals would become a special category. It defines them by reference to specific New York Education Law licensing articles, including physicians under article 131, physician assistants under article 131-B, and nurses under article 139, and would prohibit non-competes for them without regard to compensation. A physician earning above the bill’s general threshold would still be protected, where an executive at the same pay would not. That bill has passed only the Senate.

What would change if the pending bill became law?

Stated conditionally, because it has not, and could be amended before it ever does. As passed by the Senate on 3 June 2026, S9759 would do the following.

Two implications are counterintuitive. Existing agreements would survive: the bill is not retroactive, so a covenant signed in 2023 would not be voided, which is why waiting for the legislature is a poor strategy for anyone already bound. And the enumerated carve-outs do not include employee non-solicitation. Anti-raiding clauses are simply not named. What that omission would mean in practice is a question courts would have to answer, and no one should represent that it has been answered.

How does TA Legal Group handle these matters?

We represent employees and executives in the great majority of our matters, and employers in a limited number of them. We run a conflict check before taking any case. Here that matters more than in most practice areas, because the firms that write these covenants for companies are often the same firms that would be across the table from you. If a conflict prevents us from acting for you, you will hear it at the first conversation.

The work takes three forms. Before you sign, we read the agreement and the plan documents together and negotiate the edits that matter: the termination carve-out, the competitor definition, the geography, and your equity. At separation, we treat the covenant and the forfeiture as negotiable consideration alongside severance. After a threat, we take over the correspondence, deal with the new employer, and where necessary defend the injunction application. Most of these disputes end in a negotiated narrowing rather than a court order, which is the outcome that lets you keep working. The employment litigation page describes what happens when one does not resolve there.

Tim Alamgir spent years defending employers inside an AmLaw 200 labor and employment practice before moving to the employee side. That background is directly useful here: we know how these covenants are drafted, which provisions a company will surrender without escalating, and where a standard demand letter is bluffing.

The firm’s office is in Huntington, and much of this work involves employers along the Route 110 corridor in Melville and across Suffolk County. You can read more about the firm. Where a review uncovers a claim we take on, it is usually handled on a contingency fee basis, meaning no fee unless we recover for you, with case costs advanced by the firm. Fee terms for a standalone review, negotiation, or defense are put in writing before work begins, and the initial case evaluation is free and confidential. If you are holding an agreement you have not signed, or a letter you have not answered, that is the moment when your options are widest.