Your Non-Compete Agreements Might Already Be Worthless — And What You Should Be Doing Now.

05/22/2026

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For years, many private companies treated non-compete agreements as routine boilerplate. Something every executive, salesperson, or manager simply signed on the way in.  That approach no longer works.

Non-compete law in New York is in flux right now. A federal ban came and went, but Albany appears open to passing sweeping restrictions.  Meanwhile, New York courts have grown increasingly skeptical of broadly framed non-compete agreements, viewing them as unreasonable restraints on employment.  As a result, companies relying on old non-compete agreements may discover — too late — that their protections are unenforceable, essentially useless.  Every NY business should take note. This is not just an employment law issue. It’s a governance issue, a risk management issue, and increasingly, a litigation issue.

Those companies that adapt to the evolving legal landscape will be best positioned for the future, regardless of where the law ultimately lands. Those that don’t adjust may find themselves exposed, realizing it only after a key employee walked out the door. 
 

A. The State of the Law in New York

New York still permits non-compete agreements at the present time. There is no statewide statutory ban in effect.   Enforceability, therefore, is still governed by common law — specifically the four-part test stated by the NY Court of Appeals in BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999). By that standard, to be enforceable, a non-compete must:

• Protect a legitimate business interest (trade secrets, confidential client relationships, or a genuinely unique employee)
• Be reasonable in duration and geography
• Not impose undue hardship on the employee
• Not harm the public

New York courts interpret “legitimate business interest” narrowly. For qualifying interests, think of trade secrets, confidential customer relationships, and unique services. A desire to avoid competition by former employees just will not suffice.  New York law rejects broad restrictions based on vague claims of “competitive harm.”

With the increasing judicial scrutiny, the trend in New York is clear: a non-compete agreement will be void, unless it is narrowly tailored and tied to a clearly identifiable legitimate business interest. This is essentially the state of New York's common law today. But, beyond that, remember that sweeping legislation may be around the corner. If enacted, the landscape may change further, and the range of permissible non-competes, narrowed yet more.
 

B. What is Happening in Albany?

The federal ban is dead — the FTC's 2024 rule was struck down in Ryan LLC v. FTC (N.D. Tex. 2024) and formally abandoned by the federal administration in September 2025. But Albany isn't waiting. Senate Bill (S4641A), which seeks to drastically curtail non-compete agreements, passed the New York State Senate, though it is stalled. A new, similar version (S9759) was introduced in April 2026.  Key features of the bill are:

• Non-competes will be banned for workers (employees and independent contractors) earning less than $500,000 and healthcare workers, regardless of income
• Carveouts from the ban exist for "highly compensated individuals" (those earning more than $500,000) and certain business sales
• Claims will have a two-year statute of limitations and provide for liquidated damages, among other relief
• The ban is prospective only; existing non-compete agreements at the time of the law's effective date will remain in effect and enforceable

Notably, in December 2023, Governor Hochul vetoed a broader version of the bill. S4641A was redesigned to address her objections.  A new iteration of the bill (S9759) is in Senate committee. Given the absence of public commentary, the immediate outcome of the bill is unclear. 
 

C. What Companies Should Do Right Now

Predictions as to timing and scope are a bit murky, but they are essentially besides the point. Change appears to be coming. Don't get caught flat footed.

To be positioned for the future, do not wait for absolute certainty. Act now — reassess what you actually need to protect your business, tailor your agreements, and build legal protections that will survive no matter where the law ultimately lands. 

Consider this action item checklist:

1. Audit every existing non-compete. Can you identify a specific trade secret, confidential customer relationship, or genuinely unique service that each agreement protects? If you cannot, the agreement is vulnerable.
2. Calibrate duration and geography. New York courts generally view 12 months as a soft ceiling. Longer restrictions require strong justification. Nationwide restrictions are often struck down. Trim what you do not need.
3. Separate your trade secret protections and NDAs from your non-competes. If your real concern is confidential information, a well-drafted confidentiality agreement and trade secret policy get you there — without the BDO Seidman exposure.
4. Use robust non-solicitation and non-dealing clauses. Most pending bills do not prohibit non-solicitation agreements and employee raiding bans. They should survive, and, in practice, protect much of what you care about: keeping clients and teams intact.
5. Be Proactive.  Consider appropriately tailored agreements now, before any bill becomes law. Do not issue sweeping boilerplate non-compete agreements to your entire workforce; that will attract exactly the kind of judicial and regulatory scrutiny discussed above.
6. Tier your agreements. A one-size-fits-all non-compete policy is legally and practically indefensible. Reserve non-competes only for those employees with genuine access to trade secrets, and customer relationships developed at company expense, or product/market strategies that would cause material harm if disclosed. For everyone else, rely on NDAs and non-solicitation clauses.
7. Prepare a "world without non-competes" playbook now. Start building the protections that will survive: robust onboarding and offboarding processes, IP assignment agreements, garden leave provisions (courts are more favorable to non-competes where the employer pays during the restriction period), and consistent enforcement of your trade secret program.
    

Takeaway from the Counsel’s Chair

Non-compete law in New York is at an inflection point. The federal ban failed. The state ban has not yet arrived. And yet, New York courts have become more skeptical, narrowing the protections afforded to employers, regulators remain active, and Albany looks as if it is moving toward substantial restrictions on non-competes.  In short, it is not difficult to read the tea leaves.

To prepare for the future, companies should not rely on the past. The "tried and true" likely won't work anymore. It's time to develop a new playbook. What could that look like? NY businesses should create a framework of strong underlying and interlocking protections: robust trade secret programs, carefully drafted confidentiality and non-solicitation agreements, disciplined onboarding and offboarding procedures, and tailored restrictive covenants reserved only for employees who genuinely present protectable competitive risk.

Shifting the focus in this manner may help your company to better protect its hard-earned and valuable property: its client relationships, confidential information, and institutional knowledge.