For a few months in late 2023, New York employers thought non-competes were finished. The legislature had passed Senate Bill S3100A, which would have banned virtually all employee non-competes, the FTC was rolling out a federal rule that would have done the same thing nationwide, and the trade press had moved on to writing post-mortems. Then Governor Hochul vetoed the bill on December 22, 2023, the FTC rule was set aside by a federal court in August 2024, and the legal framework that has governed New York non-competes for decades quietly continued to apply. The current state of New York non-compete law looks much like it did in 2019, with one important caveat: another, narrower bill is moving through Albany right now. A New York business law attorney drafting or evaluating restrictive covenants in 2026 needs to understand both the existing common-law framework and what is likely to change in the near term.
Here is where the law actually stands, and where it appears to be heading.
What the BDO Seidman Framework Actually Says
New York courts evaluate non-compete agreements under the framework set out by the New York Court of Appeals in BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999), drawing on earlier decisions including Reed, Roberts Associates, Inc. v. Strauman, 40 N.Y.2d 303 (1976). The test has three core elements, with two additional reasonableness requirements layered on top.
A restrictive covenant will be enforced only to the extent that it:
- Is no greater than required for the protection of the employer’s legitimate interest
- Does not impose undue hardship on the employee
- Is not injurious to the public
Even covenants that satisfy all three prongs must also be reasonable in geographic scope and reasonable in duration to be enforceable. Failing any element results in the court either declining to enforce the covenant or, in some cases, narrowing it through the common-law “blue pencil” doctrine, which New York courts apply more cautiously than many other states.
The “legitimate interest” question is where most cases turn. New York courts have recognized a finite set of legitimate employer interests:
- Protection of trade secrets and confidential client information
- Protection of customer relationships and goodwill the employer cultivated, particularly through investments the employee did not make
- Protection against the disclosure of services that are genuinely unique or extraordinary
A general interest in avoiding competition is not legitimate under New York law. An employer that drafts a non-compete to keep a sales representative away from any competing firm in the entire industry, with no tie to specific protectable information or relationships, will struggle to enforce it.
Where Non-Competes Hold Up and Where They Fail
The cases that succeed under BDO Seidman tend to share certain features. The employer can point to specific confidential information the employee accessed. The customer relationships protected are ones the employer paid to cultivate, not relationships the employee brought from prior employment. The duration is calibrated to the time the employer needs to replace the employee or contain the competitive harm. The geographic scope matches where the employer actually does business, not where it might want to expand.
The cases that fail tend to share opposite features. A 24-month nationwide non-compete given to a mid-level marketing manager is unlikely to survive judicial scrutiny. A non-compete signed at termination as a condition of severance, without separate consideration, gets close attention. Restrictions that prevent an employee from earning a living in their profession entirely, particularly in specialized fields with limited alternative employers, often fail the undue hardship prong.
A recurring drafting mistake is treating customer non-solicitation as a separate question from non-competition. The same legitimate interest analysis applies. A non-solicitation provision protecting customers the employee never worked with, or customers the employee brought to the firm, often fails on the same legitimate-interest grounds that defeat broad non-competes.
What a New York Business Law Attorney Considers in 2026
The legal context surrounding non-competes has shifted even though the BDO Seidman framework has not. Several developments matter.
The FTC’s national non-compete ban, issued in April 2024, was set aside by Judge Ada Brown of the Northern District of Texas on August 20, 2024, in Ryan LLC v. FTC. The rule is not currently in effect, but the litigation continues on appeal, and the FTC’s enforcement priorities remain skeptical of broad non-competes. Drafting decisions made today should anticipate that aggressive non-competes can attract regulatory attention even where the rule itself is not in force.
Senate Bill S4641A, introduced in February 2025 and passed by the Senate, would ban non-compete agreements for “covered individuals” earning less than $500,000 annually, and for “health related professionals” regardless of compensation. The bill prevents employers from using choice-of-law and choice-of-venue clauses to circumvent its provisions for employees who reside in, report to, or are accountable to supervisors in New York. Whether Governor Hochul will sign a bill substantially broader than the $250,000 threshold she previously indicated she would support is uncertain, but the trajectory of New York non-compete law is clearly toward narrower enforceability.
Industry-specific carve-outs already exist. New York Labor Law § 202-k prohibits broadcasting employers from requiring certain employees to sign non-competes as a condition of employment. Healthcare-specific restrictions are likely if S4641A is enacted in its current form.
Sale-of-business non-competes operate under a different and generally more permissive standard. Covenants given by a seller in connection with the sale of a business, where the seller is also receiving payment for goodwill, have historically been enforced in New York with longer durations and broader scope than employment non-competes. The pending legislation does not change this framework.
The Employee Choice Doctrine remains relevant. New York courts have long enforced forfeiture-for-competition clauses in incentive compensation plans, treating them as choices rather than restraints, even where a corresponding employment non-compete would not be enforceable. This is one of the few areas where New York is more employer-friendly than many other states.
What Employers Should Be Doing Now
A few practical moves position New York employers well under both the current framework and any narrower legislation that follows.
Audit existing restrictive covenants against the BDO Seidman analysis, paying particular attention to the legitimate-interest prong. Covenants that cannot be tied to specific protectable interests are vulnerable now and will be more vulnerable under any narrower statute.
Calibrate duration and geographic scope to what is actually necessary. New York courts increasingly view 12-month restrictions as a soft ceiling for most employees, with longer restrictions requiring strong justification.
Layer non-disclosure agreements and trade secret protections separately from non-competes. If the underlying interest is confidential information, an enforceable NDA reaches the same protective goal without the BDO Seidman exposure.
Reserve sale-of-business non-competes for actual sale transactions, drafted with appropriate consideration and goodwill recitations.
Anticipate compensation-based thresholds. Any new statutory restriction is likely to carve out high earners, so structuring restrictive covenants around senior, well-compensated employees concentrates enforceability in the population most likely to remain covered.
When to Bring in a New York Business Law Attorney
Non-compete law in New York is not where most online templates leave off. The BDO Seidman analysis is fact-intensive, the legislation likely to pass in 2026 will materially change the landscape, and the specific drafting choices in a covenant determine whether a court will enforce it or set it aside. A New York business law attorney auditing existing restrictive covenants, drafting new ones, or evaluating whether to enforce a covenant against a departing employee can navigate the framework in a way that holds up under judicial scrutiny.
The Mundaca Law Firm advises New York employers and businesses on restrictive covenants, employment compliance, and the broader employment law issues that surface alongside them. If your company’s non-compete and non-solicitation agreements have not been reviewed against the current BDO Seidman analysis and the pending legislative changes, a compliance review now is significantly more efficient than litigating an unenforceable covenant later.