Non-Compete Bans and Executive Contracts: What’s Changing in New York

Non-compete agreements remain enforceable in New York, despite the increasing legal scrutiny. Executives and senior employees are frequently asked to sign restrictive covenants that limit where and when they can work after leaving a company. At the same time, federal regulators and New York lawmakers have questioned whether broad non-competes unfairly restrict worker mobility. 

What Is a Non-Compete Agreement?

A non-compete agreement is a contract provision that restricts an employee’s ability to work for a competitor or start a competing business after employment ends. These clauses often appear in executive employment agreements, severance packages, and equity plans.

In New York, non-competes are not automatically invalid. Courts evaluate whether a restriction is reasonable and necessary to protect legitimate business interests. The analysis focuses on the specific facts of the employment relationship rather than job titles alone.

How New York Courts Evaluate Non-Competes

Under New York common law, a non-compete may be enforceable only if it:

• Protects a legitimate business interest, such as trade secrets or client relationships
• Is reasonable in duration and geographic scope
• Does not impose undue hardship on the employee
• Does not harm the public interest

Courts closely scrutinize non-competes imposed on employees who lack access to confidential information or decision-making authority. Even for executives, overly broad restrictions may be narrowed or invalidated.

Why Executive Contracts Receive Closer Attention

Executives are more likely to be subject to non-competes because of their access to sensitive information, strategic plans, or high-level client relationships. However, this does not mean every restriction is enforceable.

Courts examine whether an executive actually used proprietary information or cultivated unique client goodwill. Non-competes that attempt to restrict competition for long periods or across broad industries may still fail, even when applied to senior leaders.

Executives should also be aware that non-competes often appear alongside other restrictive covenants, such as non-solicitation and confidentiality clauses, which may remain enforceable even if a non-compete is not.

FTC Guidance and Federal Developments

The Federal Trade Commission has taken the position that non-compete agreements can limit competition and worker mobility. In April 2024, the FTC issued a rule that would ban most non-compete agreements nationwide; however, the rule was challenged and never took effect. The FTC abandoned appeals in September 2025 under the new administration. It has no overriding impact on state law like New York’s. The FTC now pursues case-by-case enforcement against “abusive” non-competes, emphasizing alternatives like non-solicits.

New York Labor Law and Legislative Activity

New York does not currently have a statutory ban on non-compete agreements. Proposed legislation to prohibit non-competes for employees has been introduced in recent years, but has not been enacted into law.

As a result, New York employers and employees must continue to rely on common-law standards. That said, New York law already provides strong protections against overly restrictive agreements, particularly when they interfere with a worker’s ability to earn a living.

Executives should not assume that a signed non-compete will automatically be enforced as written.

How Non-Competes Affect Severance and Post-Employment Rights

Non-compete clauses often appear in severance agreements or equity award documents. Employees may feel pressure to accept restrictions in exchange for severance pay or benefits.

Before agreeing to a post-employment restriction, it is essential to understand:

• Whether the non-compete is tied to severance or applies regardless of termination reason
• How long the restriction lasts and where it applies
• Whether compensation is provided during the restricted period
• What activities are actually prohibited

Courts may consider whether an employee received adequate consideration when evaluating the enforceability of a contract.

When Non-Competes May Be Challenged

Employees may have grounds to challenge a non-compete when:

• The restriction is broader than necessary
• The employee was terminated without cause
• The agreement restricts work beyond a narrow industry or role
• The employee had limited access to confidential information
• The agreement was imposed after employment began without additional consideration

In some cases, courts may modify a non-compete rather than enforce it as written. In others, the restriction may be invalidated entirely.

Understanding Your Options Before You Sign

Non-compete agreements remain a significant issue in executive employment contracts. Although the FTC’s attempted nationwide ban on most non-competes was abandoned, New York continues to rely on common-law standards for enforcement. Courts require individualized analysis, enforcing restrictions only when they are reasonable and necessary to protect legitimate business interests—rather than applying blanket enforcement.

Executives should carefully review any proposed non-compete, considering its duration, scope, and potential impact on future opportunities. If you are asked to sign a non-compete or are facing restrictions after leaving a job, contact Lipsky Lowe for a confidential consultation.

Non-compete agreements remain a significant issue in executive employment contracts, even as regulatory attention increases. New York law continues to require individualized analysis rather than blanket enforcement. If you are asked to sign a non-compete or are facing restrictions after leaving a job, contact Lipsky Lowe for a confidential consultation.