Non-compete and non-solicitation clauses are restrictive covenants that limit your ability to work for competitors or contact former clients and colleagues after leaving your job. In New York, these restrictions must be reasonable in time, geographic scope, and industry limitation to be enforceable, and employers typically must provide additional compensation beyond standard severance to make them binding. Understanding the difference between these two restrictions, knowing your negotiation leverage, and recognizing when terms cross the line from protective to punitive can help you secure a severance agreement that protects your career mobility while respecting legitimate business interests.
Key Takeaways
- Non-compete clauses restrict where you can work, while non-solicitation clauses limit who you can contact – understanding this distinction is crucial for negotiation
- New York courts require restrictive covenants to protect legitimate business interests and be reasonable in scope, duration, and geography
- You can negotiate these clauses, especially their duration, geographic reach, and compensation terms
- Garden leave provisions and carve-outs for pre-existing relationships often make restrictions more palatable
- Industry matters: tech and healthcare face different enforcement standards than finance and professional services
- Without additional consideration beyond severance, non-compete agreements may be unenforceable
- The FTC’s proposed ban on non-competes could dramatically change enforceability, though New York state law still applies
Disclaimer: This article provides general information for informational purposes only and should not be considered a substitute for legal advice. It is essential to consult with an experienced employment lawyer at our law firm to discuss the specific facts of your case and understand your legal rights and options. This information does not create an attorney-client relationship.
What's the Difference Between Non-Compete and Non-Solicitation Agreements?
Non-compete agreements prevent you from working for competitors or starting a competing business, while non-solicitation agreements only restrict you from pursuing specific relationships – typically clients you worked with or employees you managed.
Think of it this way: a non-compete keeps you out of the competitive marketplace entirely, while a non-solicitation lets you work anywhere but limits who you can do business with. This distinction matters enormously for your career options. A two-year non-compete in financial services might lock you out of your entire industry in the New York metro area. A two-year non-solicitation might only prevent you from calling your former clients, leaving you free to build new relationships at a competitor.
Non-solicitation agreements typically come in two forms: client non-solicitation and employee non-solicitation. Client non-solicitation prevents you from doing business with customers you serviced or learned about during employment. Employee non-solicitation stops you from recruiting former colleagues to your new company.
Are Non-Compete Agreements Enforceable in New York?
New York courts will enforce non-compete agreements, but only when they protect legitimate business interests and impose reasonable restrictions. The agreement must be necessary to protect trade secrets, confidential information, or unique services you provided.
Courts apply a reasonableness test examining three factors: duration, geographic scope, and scope of prohibited activities. A non-compete lasting six months to one year covering New York City for a specific industry segment often passes muster. A five-year worldwide ban on any employment in financial services? That’s likely headed for the courtroom recycling bin.
Recent developments have shifted the landscape. While the FTC’s proposed nationwide ban on non-competes faces legal challenges, New York legislators have repeatedly considered bills limiting these agreements to high earners only. Currently, though, New York enforces reasonable non-competes at all income levels, unlike neighboring states with salary thresholds.
Can You Negotiate Non-Compete Clauses in Severance Agreements?
Absolutely – and you should. Employers often start with broad restrictive covenants, knowing they’ll negotiate down. Your leverage depends on several factors: whether you’re being terminated without cause, if there are potential legal claims, and how badly the company wants a clean exit.
Start by examining the business justification. If you’re a marketing manager being laid off in a restructuring, why does the company need a non-compete at all? You’re not taking trade secrets, and they clearly don’t need your services. Push back on whether any restriction is necessary.
If some restriction is unavoidable, negotiate the terms:
How Long Should Non-Compete Agreements Last?
Duration is often the easiest element to negotiate. While employers might initially propose 18-24 months, courts rarely enforce restrictions beyond 12 months unless you had access to extremely sensitive information.
For most positions, six months is reasonable. Senior executives with strategic knowledge might face 12 months. Anything longer requires extraordinary justification – and extraordinary compensation.
What Geographic Limitations Are Reasonable?
Geographic scope should match your actual job responsibilities. If you only handled Northeast accounts, a nationwide restriction is overreaching. If you worked remotely for clients across multiple states, the analysis gets more complex.
Push for specific definitions. “Greater New York City area” is vague – does it mean the five boroughs? The tri-state area? Within 50 miles of Manhattan? Clarity helps both parties and makes the agreement more likely to be enforced as written.
How Much Compensation for Non-Compete Agreements?
Here’s where many employees miss opportunities. If your employer wants you to sit out of the market, they should pay for that privilege. Garden leave provisions – where you remain on payroll during the non-compete period – are standard in finance and increasingly common elsewhere.
At a minimum, push for extended severance pay equal to the non-compete period. If they want six months of non-compete, you should receive at least six months of severance. Some industries provide 50-100% of the base salary during the restriction period.
What Industry-Specific Factors Affect Enforceability?
Different industries face varying enforcement standards based on competitive dynamics and information sensitivity.
Banking and Financial Services
Financial services agreements often receive more favorable treatment from courts due to client relationship value and regulatory considerations. FINRA registrations and Series licenses create additional complexity. However, courts still require reasonable terms – that two-year non-compete your managing director agreement includes might not fly for an analyst role.
Healthcare and Medical Professionals
Healthcare non-competes face unique scrutiny due to patient care continuity and physician shortage concerns. New York courts balance practice protection against public health needs. Geographic restrictions are particularly important – preventing a specialist from practicing within 25 miles might leave communities without critical services.
Technology and Startups
Tech industry non-competes focus heavily on protecting intellectual property and preventing knowledge transfer to competitors. However, New York courts recognize that general skills and industry knowledge aren’t protectable. Your employer can’t prevent you from using Python programming skills, but they might restrict you from building a directly competing product using their proprietary algorithms.
What Red Flags Signal Overreaching Restrictions?
Watch for these warning signs of potentially unenforceable terms:
Overly Broad Industry Definitions: Restricting you from “any business in the financial sector” when you worked in a narrow specialty is likely overbroad.
Retroactive Client Restrictions: Prohibiting contact with clients from before your employment or those you brought to the company independently may be unenforceable.
Infinite Geographic Scope: “Anywhere Company does business” could mean globally for large corporations – courts prefer specific geographic boundaries.
Activity-Based Rather Than Employer-Based Restrictions: Preventing you from “engaging in marketing activities” anywhere, versus “working for competing companies,” attempts to restrict your livelihood rather than protect legitimate interests.
Missing Consideration: If the non-compete appears in your severance agreement without additional compensation or benefits beyond standard severance, enforceability is questionable.
How Do Garden Leave and Carve-Out Provisions Work?
Garden leave keeps you on payroll during the restricted period, providing income while protecting company interests. This arrangement makes restrictions more palatable to courts since you’re not left without income.
Negotiate for carve-outs that protect your career flexibility:
Prior Relationship Exceptions: You should remain free to work with contacts you had before joining the company.
Personal Investment Exceptions: Passive investments in competitors (usually up to 1-2% of public company stock) shouldn’t violate the agreement.
Geographic Carve-Outs: If you’re relocating to California or another state that doesn’t enforce non-competes, include language acknowledging different state law applications.
Start Date Flexibility: Push for the restriction period to begin when you start new employment rather than immediately upon termination – this gives you job search time without burning through the restriction period.
What Happens If You Violate a Non-Solicitation Agreement?
Violations can trigger serious consequences. Your former employer might seek an injunction preventing you from continuing the prohibited activity, monetary damages for lost business, and attorney’s fees if the agreement includes a fee-shifting provision.
However, proving violations isn’t always straightforward. If a former client reaches out to you independently, that’s different from active solicitation. Document unsolicited contacts carefully. Save emails showing the client-initiated contact. If you’re at a new company, inform HR immediately about any gray areas to protect both yourself and your new employer.
Courts also consider whether actual harm occurred. If you contacted a former client but no business resulted, enforcement actions become less likely – though you’ve still taken an unnecessary risk.
Can Your Employer Enforce a Non-Compete If They Fire You Without Cause?
This depends on your agreement’s specific language and circumstances. New York courts have occasionally refused to enforce non-competes when employers terminate employees without cause, especially if bad faith is involved.
However, don’t assume termination automatically voids restrictions. Most well-drafted agreements specify that restrictions apply regardless of who initiates separation. Your stronger argument focuses on whether enforcement serves any legitimate business interest when the company chooses to end the relationship.
Negotiate for “cause” carve-outs during severance discussions. If you’re terminated without cause or laid off in a reduction in force, restrictions should be shortened or eliminated. Companies pushing for restrictions after choosing to eliminate your position face an uphill credibility battle.
What Should You Do Before Signing?
Before accepting any severance agreement with restrictive covenants, map out your next career moves. Consider where you want to work, which companies might hire you, and whether the restrictions actually impact those plans.
Review your employment agreement and any previous non-compete obligations – sometimes, severance agreements try to extend or modify existing restrictions. New York law generally requires fresh consideration for material modifications to existing agreements.
Calculate the true cost of the restrictions. If the non-compete effectively forces a career change or relocation, factor that into your severance demands. The compensation should reflect the actual burden you’re accepting.
Remember that these agreements are negotiable, particularly when you’re being terminated without cause or have potential legal claims. Even if the company won’t eliminate restrictions entirely, you can often improve terms significantly through negotiation.
Conclusion: Protecting Your Career Future
Non-compete and non-solicitation clauses in severance agreements require careful analysis and strategic negotiation. While New York enforces reasonable restrictions that protect legitimate business interests, overreaching terms remain vulnerable to challenge. Understanding the differences between types of restrictions, recognizing your negotiation leverage, and knowing industry standards helps you secure terms that balance your former employer’s concerns with your need to continue your career.
The key is reasonableness – in duration, geography, and scope. Push for garden leave or enhanced compensation if significant restrictions are unavoidable. Document any negotiations and keep records of how you comply with restrictions after signing.
Your career mobility has value. Don’t sign it away without appropriate compensation and careful consideration of the impact on your professional future. If you’re facing restrictive covenants in a severance agreement, professional legal guidance can help you understand enforceability and negotiate better terms.
Ready to review your severance agreement’s restrictive covenants? Contact Nisar Law Group for a confidential consultation about protecting your career mobility while securing the best possible exit package.
Frequently Asked Questions About Non-Compete and Non-Solicitation Clauses
A non-compete prevents you from working for competitors or starting a competing business entirely – it locks you out of your industry within a specific geographic area. A non-solicitation only restricts who you can contact (former clients or colleagues) but still lets you work for competitors. Think of it this way: with a non-solicitation, you can take a job at a competing bank across the street, but you just can’t call your old clients. With a non-compete, you can’t take that job at all. This distinction matters enormously for your career mobility and negotiation leverage.
Yes, you can work for a competitor with only a non-solicitation agreement in place. Non-solicitation agreements don’t prevent competitive employment – they only restrict you from actively pursuing specific relationships with your former employer. You’re free to accept a position at a competing company, build new client relationships, and work in your field. Just document that any former clients or employees who contact you did so independently, without your solicitation. Keep records of how new business comes to you to protect yourself from false violation claims.
New York courts are increasingly skeptical of enforcing non-competes when employers terminate employees without cause, especially if bad faith is involved. While the agreement’s specific language matters, courts often question what legitimate business interest needs protection when the company chooses to end the relationship. Your termination without cause strengthens your negotiation position significantly – use this leverage to push for shortened restrictions, narrowed geographic scope, or a complete waiver. Courts recognize the unfairness of preventing someone from working after involuntary termination, though they don’t automatically assume the restrictions automatically become void without reviewing your specific agreement.
Non-solicitation clauses typically run 12-24 months, longer than most non-competes because they’re less restrictive on your career. Courts more readily enforce longer non-solicitation periods since you can still work in your field. However, anything beyond two years faces increased scrutiny unless you have extraordinary access to client relationships or trade secrets. During severance negotiations, push to reduce these periods – every month counts. Remember that the clock should start when you leave, not when you find new employment, so negotiate for clarity on timing.
In New York, non-competes require “consideration” – something of value beyond what you’re already entitled to receive. If a non-compete appears only in your severance agreement without additional compensation beyond standard severance, its enforceability is questionable. You need to receive something extra: garden leave, enhanced severance, or specific non-compete compensation. If you’re already employed and asked to sign a new non-compete, continued employment alone isn’t sufficient consideration in New York – you need a raise, bonus, or other benefit. Use this leverage during negotiations to demand proper compensation for accepting career restrictions.
Violations can trigger serious consequences: your former employer might seek an injunction stopping the prohibited activity, monetary damages for lost business, and attorney’s fees if the agreement includes fee-shifting provisions. However, proving violations isn’t always straightforward. If a former client independently seeks you out, that’s different from active solicitation. Document everything: save emails showing clients initiated contact, keep records of how new business develops, and inform your new employer immediately about any restrictions. The key is showing you didn’t actively pursue protected relationships. Courts examine actual behavior, not assumptions.
California, North Dakota, Oklahoma, and Minnesota (as of 2023) generally prohibit or severely limit non-compete agreements. If you’re planning to relocate to one of these states, include specific language in your severance agreement acknowledging that the restrictions may not apply in your new location. However, simply working remotely from California for a New York company doesn’t automatically void your agreement – courts look at where the employment relationship was centered. If relocating, negotiate for geographic carve-outs or acknowledgment of different state law applications in your severance terms.
While it’s harder to negotiate after signing, it’s not impossible. Material changes in circumstances – like your employer being acquired, your role being eliminated, or the business strategy shifting – can create opportunities for renegotiation. If your employer needs something from you (transition assistance, training a replacement, or signing additional releases), use that leverage to revisit restrictive covenants. Sometimes employers will agree to modifications to avoid litigation risk or maintain goodwill. The key is identifying what leverage you have and approaching negotiations strategically.
Have questions about restrictive covenants in your severance agreement? These terms are negotiable, and understanding your leverage can mean the difference between career restrictions and career freedom. Contact Nisar Law Group for a confidential consultation about protecting your professional future while securing the best possible severance package.
