On April 23, 2024, the United States Federal Trade Commission voted to ban non-compete agreements. What is a non-compete agreement and what does the ban mean? Today’s Long Island employment law blog explores these issues and the FTC’s new rule.
Non-compete agreements are contracts (or provisions in contracts) which limit or bar an employee or worker from working in a similar industry or from opening a business in the same or similar industry as their current employer. For example, non-competes are widely used in the sales and could limit a pharmaceutical salesperson from leaving Drug Company A to sell for a Drug Company B. Since non-competes will generally be imposed by a prospective employer as a condition of employment, employees and workers typically have no ability to negotiate the terms and must accept the conditions imposed, if they want the job.
New York disfavors non-competes, but nonetheless, courts will enforce non-competes if the terms are reasonable, including in time, scope, and geography. In other words, courts are more inclined to enforce non-competes if its terms last for just a year, if it is limited to a narrow industry, and if it’s limited to, for instance, a 25 mile radius around the employer’s main headquarters.