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Empire State business leaders have noted that, on three separate occasions this summer, New York State Attorney General Eric Schneiderman announced agreements with important business entities in which the latter agreed to stop requiring broad swaths of their employees to sign non-compete agreements. In one June 22, 2016 press release, the AG announced that Jimmy John’s Gourmet Sandwiches had even agreed to stop including sample non-compete agreements in hiring packets it sends to its franchisees.
Attorney General’s Position is in Tandem With Existing Law
The move by the AG’s office signals a commitment to existing New York laws through which state courts will enforce non-compete agreements only where special protections are required to safeguard an employer’s good will or trade secrets. According to the AG’s office, “rank and file” workers, particularly those who earn only modest pay, should not be subject to the sort of employment restrictions typically contained in non-compete agreements.
New York’s is Consistent with Position Taken by Federal Government
Schneiderman’s position is consistent with the position taken by our federal government. In March 2016, a U.S. Treasury Department report said that non-compete agreements are often harmful to “worker welfare, job mobility, business dynamics, and economic growth more generally.” Similarly, President Obama’s office released a report in May 2016 that was highly critical of the broad use of non-competes in some industries, noting that the restrictions inhibit innovation.
New York Non-Compete Provisions Must Be Carefully Crafted
Legal experts observe that one particularly important problem with many non-compete provisions is they use stock, “boilerplate,” language. To be enforceable, the non-compete provisions must be carefully drawn to fit the particular circumstances involved. Here are some suggestions:
- Employers should not present non-compete agreements to those employees who have no knowledge of or contact with the firm’s trade secrets, customer lists, and other confidential information. Use of employment restrictions should be limited to executives, those in significant sales positions, and those who possess truly unique or special skills.
- Employers should refrain from restricting the employee’s post-employment activities to a territory that is too broad. Generally speaking, the broader the restriction, the less likely the court will enforce it. Conversely, the broader the restriction, the more likely the business may get a visit from the Attorney General’s office.
- Similarly, the time limit of the restriction must be reasonable. What is reasonable for a person with unique skills may not be reasonable for a junior salesperson.
- Before litigating an employment issue, such as a non-compete provision, the business should analyze the negative impact that it will have on business generally. If a business treats its employees unfairly, customers and vendors are likely to feel they will be handled similarly.
Use of Non-Compete Agreements Generally Requires Expert Legal Counsel
As already noted, non-compete agreements are not favored by New York law. There are nevertheless specific situations in which they can be utilized. Most businesses determine that if the situation is serious enough to warrant post-employment restrictions, it is also serious enough to retain expert counsel to get the job done. Only then does the business stand a good chance that the court will enforce the restrictive provisions.
The E. Stewart Jones Hacker Murphy law firm has extensive experience in assisting businesses and individuals in employment law issues and disputes. We are one of the most highly respected law firms in upstate New York and the capital district. With offices in Albany, Troy, Saratoga Springs, and Schenectady, we have been representing clients for more than 100 years. Make the right call. Call us now at (518) 274-5820 or complete our online form. The E. Stewart Jones Hacker Murphy law firm has an attorney available to assist clients 24 hours a day, 7 days a week, 365 days a year – even on holidays.