Although non-competition agreements with employees are permitted in New York, courts generally enforce them in favor of employers only where the agreements are supported by adequate consideration and are deemed reasonable in scope. This article discusses the requirements under New York law governing provisions in employment agreements that restrict an employee’s ability to compete.
Adequate Consideration
The adequacy of consideration is usually determined by a fact-specific inquiry. Typical forms of consideration highlighted in the case law have included: initial employment; continued employment of an at-will employee where discharge was the alternative, or where continued employment is for a “substantial period” after the non-competition agreement was entered into; promotion to a position of responsibility; a special monetary payment that the employee is not otherwise entitled to; and payment of benefits and salary during the employee’s period of non-competition. See, e.g., Zellner v. Stephen D. Conrad, M.D., P.C., 589 N.Y.S.2d 903, 907 (2d Dep’t 1992) (continued employment); BDO Seidman v. Hirshberg, 690 N.Y.S.2d 854, 856-57 (1999) (promotion); Maltby v. Harlow Meyer Savage, Inc., 633 N.Y.S.2d 926, 928 (Sup. Ct. N.Y. Cty. 1995) (payment of salary during garden leave period), aff’d, 637 N.Y.S.2d 110 (1996). The adequacy of consideration is typically not the determining factor or focus when parties litigate non-competition agreements.
