NON-COMPETE AGREEMENTS: NEW YORK APPELLATE COURT LIMITS ENFORCEMENT

Many employers require employees to sign non-compete agreements as a condition of new or continued employment. Although courts across the country (including New York) do not view these agreements favorably, this has not stopped employers from attempting to enforce them after an employee is terminated or voluntarily leaves.

A recent decision from the First Department of New York's Appellate Division (covering New York County and Bronx County) limits the enforcement of non-compete agreements in certain circumstances. In Buchanan Capital Markets LLC v. DeLucca, the appellate court's most significant ruling is that when an employee is terminated without cause, the courts will not enforce a non-compete agreement. The court ruled that an employer must demonstrate "continued willingness to employ the party covenanting not to compete" as consideration for the employer agreeing to not compete. In other words, the employer must be willing to continue employing the employee before it seeks to enforce a non-compete agreement.

This decision is significant for both employers and employees who are seeking to either enforce or avoid non-compete agreements and should be considered when making termination decisions and before seeking to enforce such agreements.