Employers typically include specific protections for themselves in employment contracts. Restrictive covenants are agreements that prevent an employee from engaging in certain behaviors.
Non-compete agreements are some of the most common restrictive covenants in modern employment contracts. They prohibit an employee from starting a competing business or going to work for a direct competitor after leaving a position.
If an employee does engage in unfair competition after leaving a position, their employer could go to the courts and ask them to enforce the non-compete agreement. How can companies ensure their non-compete agreements are valid and enforceable?
They must be necessary and limited in scope
New York expects that employers will only require non-compete agreements when they are necessary to protect the business’s interests.
Preventing a lead engineer from working for a competing manufacturing company may be crucial for the original employer’s success. Preventing a short-order cook from moving to a new restaurant, on the other hand, will likely have little impact on a business’s overall success.
Additionally, there need to be reasonable limits to the agreement. Typically, it can only last for a fixed amount of time, and geographic limitations may be necessary as well.
The employee should have received some kind of valuable consideration
Companies can’t just require their existing workers to sign contracts to keep their jobs. A worker has to receive something for the concessions they make when signing a non-compete agreement.
Offers of employment and promotions are common forms of compensation. A company could offer something else, like a gift card or an extra vacation day for existing employees.
Understanding what makes employment contracts enforceable can lead to better protections for an employer.