How the common-law reasonableness framework continues to govern non-competes and non-solicits — and how pending legislation may narrow the field.

Overview

Recent decisions have tightened the enforcement parameters for restrictive covenants in New York while a pending bill in the Legislature seeks, a landmark statutory ceiling, on these claims.

Below is an overview of the governing framework, issues that drive disputes, and the legislative outlook.

Governing Legal Framework

New York regulates restrictive covenants primarily through common law. The controlling test comes from BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999). A post-employment restraint is enforceable only if it (i) is no greater than necessary to protect a legitimate employer interest, (ii) does not impose undue hardship on the employee, and (iii) does not injure the public. Reasonableness is measured against scope, duration, geography, and the activity restricted.

The categories of protectable interest were fixed in Reed, Roberts Associates, Inc. v. Strauman, 40 N.Y.2d 303 (1976), and refined by the Second Circuit in Ticor Title Insurance Co. v. Cohen, 173 F.3d 63, 69–70 (2d Cir. 1999). They are four: trade secrets; confidential customer information; the employer’s client base or goodwill; and protection against competition by an employee whose services are unique or extraordinary. A general desire to prevent competition is not among them. The line is not between protected and unprotected employers; it is between unfair competition and ordinary competition.

A separate line of authority addresses what happens when the employer terminates the employee. Post v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 48 N.Y.2d 84 (1979), and later cases treat an employer’s lack of continued willingness to employ the individual as a strong reason not to enforce a post-employment restraint, particularly where the covenant would economically burden the former employee. Termination without cause is best understood as a major factor, not an automatic rule.

New York courts have also long recognized that a party in material breach of a contract may forfeit the right to enforce its remaining provisions [citation needed]. That principle has particular force when applied to restrictive covenants supported by ongoing payments.

Pending Legislative Reform: Senate Bill S4641

On February 10, 2025, Senator Sean Ryan introduced S4641, a bill that would dramatically narrow the use of non-competes in New York. The Senate passed the bill on June 9, 2025, and it has been delivered to the Assembly Labor Committee. The bill does not apply retroactively and would not void existing agreements.

If enacted, S4641 would prohibit employers from seeking, requiring, demanding, or accepting a non-compete from any New York resident or employee, except in the case of a “highly compensated individual” — defined as an individual whose average annualized cash compensation over the prior three years equals or exceeds $500,000, indexed to CPI beginning in 2027. Even for those individuals, the bill would impose three additional constraints:

• The employer must continue paying the former employee’s salary during the period of enforcement.

• The covenant must still satisfy the common-law BDO Seidman framework — reasonable in scope, geography, and duration, protective of a legitimate interest, and not unduly burdensome.

• The duration may not exceed one year.

• The bill also voids out-of-state choice-of-law and choice-of-venue clauses for any individual who resided or worked in New York within thirty days of separation, and creates a private right of action with a two-year limitations period running from the latest of signature, discovery, termination, or any step taken to enforce. Remedies include voiding the agreement, injunctive relief, liquidated damages up to $10,000, lost compensation, compensatory damages, and attorneys’ fees.

S4641 contains targeted carveouts. It does not reach covenants entered into in connection with the sale of a business (for owners holding at least a 15% interest), fixed-term or exclusivity agreements during employment, non-disclosure or trade-secret protections, or client non-solicitation provisions. A prior version of the bill, which would have banned non-competes entirely, was vetoed by Governor Hochul in December 2023; the current bill is the narrower successor.

Practical Application

In real disputes, four issues account for most enforcement battles.

• First, overbreadth. Covenants that prohibit any work “similar in nature” to the employee’s prior services — or that sweep across an entire industry without tying the prohibition to the employee’s actual role — invite narrowing or rejection. Recent federal decisions applying New York law confirm the point: a non-compete that bars a former employee from working for a competitor in any capacity, including in noncompetitive lines of business, is vulnerable. See Flatiron Health, Inc. v. Carson, 2020 WL 1320867, at *21 (S.D.N.Y. Mar. 20, 2020); Magtoles v. United Staffing Registry, Inc., 665 F. Supp. 3d 326, 348 (E.D.N.Y. 2023). Breadth of function can be as fatal as breadth of geography.

• Second, the effect of termination. Where an employee is terminated without cause, courts often view post-termination restraints with skepticism under Post, especially when the practical effect is to prevent the former employee from earning a living.

• Third, the employer’s own performance. Where a covenant is supported by ongoing payments during the restricted period, the employer’s failure to make those payments can fatally undermine its ability to insist on continued post-employment restraints. The same logic applies to lump-sum severance promised in connection with a separation. Notably, S4641 would codify a version of this principle by requiring the employer to keep paying during any enforcement period for highly compensated individuals.

• Fourth, non-solicitation provisions. Customer and employee non-solicits are governed by the same BDO Seidman reasonableness test, and would remain enforceable even if S4641 becomes law. But their scope is policed closely. A customer non-solicit may not prohibit solicitation of clients with whom the employee had a relationship before the current employment. See BDO Seidman, 93 N.Y.2d at 392; Flatiron Health, 2020 WL 1320867, at 23–24 (declining partial enforcement). An employee non-solicit cannot protect mere workforce stability; it must be tailored to the misappropriation of trade secrets, confidential customer information, or competition by employees whose services are unique or extraordinary. Provisions that reach all employees without regard to role, skill, or value to the employer are routinely struck down. See Permanens Capital L.P. v. Bruce, 2022 WL 3442270, at 9 (S.D.N.Y. July 22, 2022).

Blue-penciling — partial enforcement of an overbroad covenant — exists but only under stringent circumstances. SeeBrown & Brown, Inc. v. Johnson, 25 N.Y.3d 364 (2015) (declining to rewrite an overbroad non-solicitation clause and emphasizing that partial enforcement is most appropriate where overbreadth is limited and the agreement reflects a good-faith effort to protect legitimate interests. Aggressive drafting will not be rescued by judicial narrowing).

Key Takeaways

• Reasonableness controls. BDO Seidman supplies the operative framework, and the protectable interests remain the four identified in Reed, Roberts and Ticor Title.

• Overbreadth is the leading vulnerability. Flatiron Health and Magtoles confirm that prohibitions on working for a competitor “in any capacity” are likely to fail.

• Employer conduct matters. Termination without cause (Post) and failure to pay can sink enforcement; S4641 would codify continued-payment obligations for the highest earners.

• Non-solicits are not a shortcut. Pre-existing client relationships are off-limits (BDO Seidman; Flatiron Health), and workforce-stability employee non-solicits will not survive (Permanens Capital).

• Watch the Legislature. S4641 has passed the Senate and is pending in the Assembly. If enacted, non-competes will be permissible only for individuals earning $500,000+, subject to continued payment, a one-year cap, and the existing common-law test.

• Blue-penciling is discretionary. Brown & Brown confirms that aggressive drafting will not be saved by judicial narrowing.

Conclusion

Restrictive covenants in New York are enforceable when they go only as far as necessary to protect a lawful interest, and no further. That principle is now reinforced from two directions: recent federal decisions tightening the overbreadth analysis, and pending legislation that would, for most employees, take non-competes off the table altogether. Drafting still matters. So does conduct. The employer that drafts narrowly, performs its own obligations, and protects a genuine interest will find courts receptive — and will be best positioned for the framework that emerges from Albany. The employer that drafts broadly, terminates without cause, withholds payment, and then demands enforcement will not.

This article is provided for general informational purposes and does not constitute legal advice. Specific situations should be evaluated with counsel.