New York Non-Compete Law in 2026: Enforceability, the BDO Seidman Test, and Drafting

Yes, non-competes are still enforceable in New York in 2026, but only when reasonable. There is no statewide ban. Governor Hochul vetoed the 2023 ban bill (S3100A), and the narrower follow-on bills (S4641A and S9759) have passed the Senate but have not moved in the Assembly. Enforceability turns on the common-law reasonableness test in BDO Seidman v. Hirshberg, which allows a court to enforce an overbroad covenant in part, but only if the employer acted in good faith.

Reviewed and corrected on 6 October 2026. This is general information, not legal advice; check the cited statute or opinion before relying on it.

The biggest mistake in New York restrictive-covenant drafting is assuming that an empty statute book means free rein. New York's test is a common-law one, and BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999), says a restraint is reasonable only if it is no greater than needed to protect a legitimate interest of the employer, does not impose undue hardship on the employee, and is not injurious to the public. A violation of any one of those prongs makes the covenant invalid.

What happens to an overbroad covenant is more forgiving than many drafters assume. The Court of Appeals in BDO Seidman rejected the rule that an overbroad covenant is invalid in its entirety and allowed partial enforcement. But it conditioned that on the employer's conduct: the employer has to show "an absence of overreaching, coercive use of dominant bargaining power, or other anti-competitive misconduct." An employer that overreaches risks getting nothing, and one that acted in good faith may get a narrowed covenant.

Official text, as of 6 October 2026

New York has no non-compete statute, so the law is the case law discussed below. The live legislative text is the Senate bill that would add a non-compete ban to the Labor Law: N.Y. S9759 (2025-2026 Regular Sessions), proposed Labor Law § 191-d (bill page). Subdivision 2 provides:

"Any non-compete agreement sought, required, demanded or accepted after the effective date of this section shall be null, void, and unenforceable."

What changed in 2026. S9759 was introduced on April 6, 2026 and passed the Senate on June 3, 2026. The Assembly page for the bill shows it delivered to the Assembly and referred to the Labor Committee that day, with no later action. Its Assembly companion, A10023, was referred to Labor on January 28, 2026. Separately, the FTC's Non-Compete Clause Rule is no longer in the Code of Federal Regulations: the FTC removed it effective February 12, 2026 (91 FR 6507).

TL;DR

• New York has no non-compete statute. Enforceability is decided under the common-law test of Reed, Roberts Assocs. v. Strauman, 40 N.Y.2d 303 (1976), as applied in BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999).
• Governor Hochul vetoed S3100A on December 22, 2023. Senator Sean Ryan's narrower S4641A passed the Senate on June 9, 2025 and was referred to the Assembly Labor Committee. Senator Gianaris's S9759, substantively the same bill, was introduced on April 6, 2026 and passed the Senate on June 3, 2026. Neither has become law.
• If a ban is enacted, S9759 as written would take effect 30 days after enactment and apply only to contracts entered into or modified on or after that date, with no retroactive effect.
• The legitimate-interest categories are protection of trade secrets, protection of confidential customer information, and protection against competition by a former employee whose services are "unique or extraordinary," plus the employer's interest in client relationships the employee acquired through the employer's work.
• For brokers moving between firms, FINRA Rule 2140 bars interfering with a customer's request to transfer an account, and it operates alongside New York common law.
• Inevitable disclosure is disfavored in New York federal courts. EarthWeb, Inc. v. Schlack, 71 F. Supp. 2d 299 (S.D.N.Y. 1999), says that absent actual misappropriation the doctrine applies in "only the rarest of cases."

Part of our state law reference series.

The BDO Seidman framework

The Court of Appeals decided BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999) on May 13, 1999. The firm's "Manager's Agreement" said that if the manager served any former client of BDO's Buffalo office within 18 months after leaving, he would compensate the firm in an amount equal to one and a half times the fees BDO had charged that client in its last fiscal year, paid in five annual installments. The lower courts held the clause an invalid restrictive covenant. The Court of Appeals treated it as one, held it partially enforceable, and sent the case back for further proceedings on the damages formula.

The Court stated the test in two forms. As a three-prong test, a restraint is reasonable only if it "(1) is no greater than is required for the protection of the legitimate interest of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public." And quoting Reed, Roberts, a covenant is enforceable "to the extent that it is reasonable in time and area, necessary to protect the employer's legitimate interests, not harmful to the general public and not unreasonably burdensome to the employee." The second formulation lists time and area as their own elements, so practitioners who describe the test as four-factor are quoting the Court.

The legitimate-interest list is the real bottleneck. In Reed, Roberts the Court limited the cognizable interests to protection against misappropriation of trade secrets or confidential customer lists, or protection from competition by a former employee whose services are "unique or extraordinary." BDO Seidman recognized a further interest for professional-services firms: protection against the former employee's competitive use of client relationships "which BDO enabled him to acquire through his performance of accounting services for the firm's clientele."

The same opinion draws the line at clients the firm did not help him acquire. The covenant was invalid as to clients with whom no relationship developed through direct, substantive services, and it could not reach personal clients who came to the firm "only as a result of his own independent recruitment efforts, which BDO neither subsidized nor otherwise financially supported." The firm had no legitimate interest in those clients' goodwill.

Partial enforcement, not a blue pencil. The Court rejected the rule that an overbroad covenant is invalid entirely. It called that rule the "now-discredited doctrine" that invalidation of an entire covenant is required unless the invalid portion could be "mechanically severed, as with a 'judicial blue pencil.'" Instead, "a court should conduct a case specific analysis, focusing on the conduct of the employer in imposing the terms of the agreement." Under that approach, "if the employer demonstrates an absence of overreaching, coercive use of dominant bargaining power, or other anti-competitive misconduct, but has in good faith sought to protect a legitimate business interest, consistent with reasonable standards of fair dealing, partial enforcement may be justified." On the facts, the Court found the circumstances favored partial enforcement and narrowed the clause to the clients the manager had served through the firm's work.

The strategic consequence is that overbreadth is a risk to be managed rather than an automatic loss. An employer that drafts in good faith and misses by a little can get a narrowed covenant. An employer that uses a covenant as a weapon, with no connection to a protectable interest, gives the court a reason to withhold partial enforcement. BDO Seidman describes overreaching as the thing that defeats partial enforcement; we did not find a New York decision, and we do not cite one, holding that overbreadth alone is bad faith.

The vetoed statute and the bills that stalled

S3100A (2023). The Senate passed it on June 7, 2023 and the Assembly on June 20, 2023. It was delivered to the Governor on December 12, 2023 and vetoed on December 22, 2023 (Veto Memo 133) (bill history). It would have prohibited non-competes in employment and allowed a civil action with liquidated damages of up to $10,000 per affected worker. As quoted by Jackson Lewis, the veto message said the Governor's top priority was to protect middle-class and low-wage earners "while allowing New York's businesses to retain highly compensated talent," and that the bill's "one-size-fits-all approach" could not meet those businesses' legitimate interests.

S4641A (2025). Senator Sean Ryan introduced it on February 10, 2025, amended it on February 11, and the Senate passed it on June 9, 2025. It was delivered to the Assembly and referred to Labor (bill history). It keeps the prohibition for most workers and exempts "highly compensated individuals," defined by an average of the three most recent W-2 and K-1 statements of $500,000 per year or more, adjusted yearly from 2027 by the Consumer Price Index for All Urban Consumers for New York state. A non-compete that is permissible under the bill must meet the common-law requirements, cannot run longer than one year, and must "provide for the payment of salary during the period of enforcement." Health related professionals are covered by the ban whatever they earn.

S9759 (2026). Senator Gianaris introduced it on April 6, 2026. It received its first report on May 5, passed the Senate on June 3, 2026, and was delivered to the Assembly and referred to Labor. Comparing the two bill texts, the operative language is the same as S4641A's apart from formatting. The Assembly companion is A10023 (Bronson), referred to Labor on January 28, 2026.

Other features of the bills. They carve out non-competes in a sale of the goodwill of a business or a majority ownership interest, for sellers holding at least a 15 percent interest. They preserve non-solicitation of clients, confidentiality and trade-secret agreements, and fixed-term and exclusivity agreements, provided those agreements do not otherwise restrict competition. They make choice-of-law and venue clauses unenforceable where they would avoid the section for a worker who lived or worked in New York for the previous 30 days. And they would take effect 30 days after enactment, apply to contracts "entered into or modified on or after such effective date," and "have no retroactive effect." The Labor Department's duty to develop the employee notice would start 180 days after enactment.

Status. As of October 6, 2026, the Assembly pages for S9759 and A10023 show the actions listed above and nothing later, and the Senate page lists S9759 as "In Assembly Committee." The Assembly's page for S4641A shows no action after the June 9, 2025 referral and is marked "not active in this session." No version has reached the Governor since the 2023 veto. We did not find any statement from the Governor on S4641A or S9759.

The drafting bottleneck: what counts as a legitimate interest

Most New York non-compete fights turn on the first prong. An employer that pleads a legitimate interest in "confidential information and customer relationships" without saying what, in this employee's hands, was confidential or tied to the employer's investment, has given the court little to enforce.

Trade secrets. Real trade-secret protection survives. The pleading should identify the secret with reasonable particularity, such as formulae, source code, or non-public pricing, rather than reciting "proprietary methods."

Confidential customer information and client relationships. BDO Seidman protects relationships the employer enabled the employee to acquire through the employee's work for the employer's clientele. It does not protect personal clients the employee brought in without the employer's support. Its footnote adds that the result might differ if the firm had shown the employee used confidential firm information to attract clients with whom he had no relationship while employed there.

Unique or extraordinary services. BDO Seidman notes that the Court has applied this rationale to professionals. In Gelder Medical Group v. Webber, 41 N.Y.2d 680, and Karpinski v. Ingrasci, 28 N.Y.2d 45 (1971), the Court enforced total restraints on competition in limited rural locales, and BDO Seidman treated accountancy as having "all the earmarks of a learned profession." Outside the learned professions, an employer relying on this prong has to show more. The Commercial Division decision discussed below describes the test as whether the employee was "irreplaceable" and whether the departure caused "special harm" to the employer.

One recent example. Multiplier Inc. v. Moreno, Index No. 653428/2022, 2024 NY Slip Op 32290(U) (Sup. Ct. N.Y. Cnty. July 5, 2024) (Masley, J.), involved a one-year restriction on working in any competing business "anywhere in the United States" in a Proprietary Information and Assignment Agreement. In the decision and order, the court dismissed the breach claim to the extent it rested on the non-compete clause because there were no allegations that the employee was irreplaceable or that her departure caused special harm, the employer had not alleged a legitimate interest in protecting its goodwill, and the clause was overbroad, "unrestrained by any limitations keyed to uniqueness, trade secrets, confidentiality or even competitive unfairness." The claim based on the proprietary-information provisions was not dismissed on that ground. The Commercial Division blog summarizes the same ruling. The court's server blocks automated requests, so the order link is marked bot-wall.

What this means in practice: a complaint or TRO application that identifies a specific account, names the confidential data set, and ties the requested relief to that scope gives a court something to enforce. One that asks to shut the employee out of "the industry" invites the Multiplier analysis. The drafting implication runs backward into the covenant itself: write the clause your injunction papers will need.

Inevitable disclosure: still disfavored

PepsiCo, Inc. v. Redmond, 54 F.3d 1262 (7th Cir. 1995), is the case most often cited for the inevitable disclosure doctrine. New York federal courts have been cautious. In EarthWeb, Inc. v. Schlack, 71 F. Supp. 2d 299 (S.D.N.Y. 1999), the court said that in its purest form the doctrine "treads an exceedingly narrow path through judicially disfavored territory," and that "absent evidence of actual misappropriation by an employee, the doctrine should be applied in only the rarest of cases." The same opinion recognizes that some courts, including New York federal courts, have found a risk of inevitable disclosure on particular facts, so the doctrine is not unavailable.

Janus et Cie v. Kahnke, No. 12 Civ. 7201 (WHP) (S.D.N.Y. Aug. 29, 2013) (Pauley, J.), dismissed an employer's stand-alone inevitable-disclosure claim where the employer alleged no actual misappropriation and the employee had signed no non-compete. We confirmed the docket number, date and holding from secondary summaries, not the opinion; we have not confirmed a Westlaw citation.

An employer that relies on "inevitable" use, with no evidence of an actual taking and no valid covenant, is working against that line of cases.

Customer non-solicits

A covenant that reaches only clients the employee actually served tracks the reasoning in BDO Seidman, which held the clause invalid as applied to clients with whom no relationship developed through the employee's direct, substantive work. A clause that restricts solicitation of "any customer of the Company" sweeps in customers the employee never met, and invites the same objection.

We did not research the case law on employee non-solicitation (no-raid) clauses for this post.

A drafting move for 2026: lead with a tight customer non-solicit and add the non-compete only where the legitimate-interest case is strong. That is a practice suggestion, not a rule of law.

Industry-specific notes

Financial services. FINRA Rule 2140 states that "No member or person associated with a member shall interfere with a customer's request to transfer his or her account in connection with the change in employment of the customer's registered representative where the account is not subject to any lien for monies owed by the customer or other bona fide claim" (rule text). Prohibited interference includes seeking a judicial order that would bar or restrict a customer's written transfer request. The rule does not displace New York common law on non-competes. The voluntary Protocol for Broker Recruiting is a separate agreement among signatory firms. Not verified in our October 2026 review: the Protocol's current text and list of signatory firms. Check the Protocol itself before relying on it.

Do not confuse Rule 2140 with FINRA Rule 2070. Rule 2070 is titled "Transactions Involving FINRA Employees." It requires members to send duplicate account statements to FINRA for accounts in which a FINRA employee has an interest, and limits loans and gifts to FINRA employees (rule text). It has nothing to do with broker mobility.

Healthcare. In Karpinski v. Ingrasci, 28 N.Y.2d 45 (1971), the plaintiff was an oral surgeon whose assistant, also an oral surgeon, opened his own practice in Ithaca after the employment ended. The Court of Appeals reversed the Appellate Division, which had held the covenant void as too broad because it barred both dentistry and oral surgery. Quoting settled authority, the Court wrote that "[s]uch covenants by physicians are, if reasonable in scope, generally given effect," and enforced the covenant only as to oral surgery in the five specified counties. The opinion also repeats that "powerful considerations of public policy" disfavor "the loss of a man's livelihood," which is why every employee covenant faces an overriding limitation of reasonableness.

So New York is not uniquely hostile to physician covenants under the common law. The pending bills would change that for the future: S4641A and S9759 treat "health related professional" as protected from non-competes regardless of income, with the list covering physicians, physician assistants, dentists, nurses, pharmacists and others.

Pension and equity forfeiture. Post v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 48 N.Y.2d 84 (1979), is the starting point. A pension plan allowed the employer to forfeit benefits if the employee competed after leaving. The Court of Appeals noted that earlier cases had enforced such clauses against employees who left voluntarily to join a competitor, and held that "where an employee is involuntarily discharged by his employer without cause and thereafter enters into competition with his former employer," a forfeiture of earned pension benefits "is unreasonable as a matter of law and cannot stand." It sent the case back because whether the plaintiffs' termination was voluntary could not be decided on summary judgment. We did not research how this rule applies to modern equity-grant forfeiture terms, so check the current case law before drafting one.

Appellate authority: what to track

The framework in BDO Seidman has governed for more than two decades, and we did not find a reported Court of Appeals decision that changes it. We also did not research how the Appellate Division departments are currently applying it, so we make no claim about trends in the First or Second Department. The Commercial Division decision above is one example of a trial court dismissing an overbroad covenant at the pleading stage.

Drafting checklist for a covenant that holds up

A New York non-compete that survives a challenge generally has the following structure. These are practice suggestions that follow from the cases above.

A specific protectable interest, identified in the recitals. Not "confidential information generally." A defined category (non-public client pricing, deal pipeline, source-code architecture) tied to the role.

Duration calibrated to the interest. BDO Seidman involved an 18-month restriction and enforced it in part. We found no statutory cap on duration under current law, but the pending bills would cap any permitted non-compete at one year.

Geography tracking the actual footprint. Pin it to where the employee worked during a defined look-back.

Activity restraint tracking what the employee did. A restriction on soliciting clients the employee had material contact with is easier to defend than a ban on working for "any business competitive with the Company."

An example of scope language that invites trouble: "Employee shall not directly or indirectly engage in any business that competes with the Company in any geographic area in which the Company conducts business." An example that is easier to defend: "Employee shall not, for twelve months following termination, solicit business from any client of the Company with whom Employee had material contact during the final twelve months of employment, in the product lines Employee covered, in the New York metropolitan area."

Good faith in how the covenant is imposed. BDO Seidman makes the employer's conduct central to partial enforcement. A covenant written to reach as far as possible, with no tie to a stated interest, makes it harder to argue for narrowing.

Narrower covenants first. A customer non-solicit and a confidentiality agreement handle most of the risk in sales and account-management roles, and the non-compete adds value only where trade-secret exposure cannot be policed otherwise.

A hypothetical. A New York fintech hires a head of sales. The first-instinct draft is eighteen months, nationwide, all fintech businesses. A tighter draft is twelve months, the New York metro area plus the specific regions the executive manages, limited to the product line the executive sells, with a client non-solicit as a separate covenant. The second draft gives a court a reason to enforce it as written, and if the court narrows it, the narrowing is small. This is an illustration, not a reported case.

When to skip the non-compete

When a customer non-solicit is enough, skip the non-compete. The protectable interest in many sales roles is the client book, and a non-solicit aimed at it does the job with less exposure.

When the interest is general industry skill, skip it. BDO Seidman limits cognizable interests to the categories above, and general knowledge of a market is not among them.

When you are tempted to add it late. We did not research New York law on consideration for covenants added mid-employment, so we make no claim about it here.

Multi-state employer notes

A New York employer with a California-resident employee should assume California law applies to that employee whatever the contract says. Cal. Bus. & Prof. Code § 16600.5(a) makes a contract that is void under the chapter "unenforceable regardless of where and when the contract was signed," and subdivision (b) says an employer "shall not attempt to enforce" such a contract "regardless of whether the contract was signed and the employment was maintained outside of California."

For a non-New York employer with a New York-resident employee, the question is whether a foreign choice-of-law clause holds. Not verified in our October 2026 review: how New York courts and federal courts in New York currently handle that clause. Check current Court of Appeals and Second Circuit authority. The pending S9759 would address it by making choice-of-law and venue clauses unenforceable where they avoid the section for a worker who has lived or worked in New York for the prior 30 days, but that is a bill, not law.

FAQ

Are non-competes enforceable in New York in 2026? Yes, when they are reasonable. New York has no non-compete statute, so enforceability runs through the common-law test in BDO Seidman v. Hirshberg. A covenant tied to a legitimate interest, reasonable in time and area, can be enforced. If it is overbroad, a court may enforce it in part, but only where the employer acted in good faith and without overreaching.

Did New York ban non-competes? No. The Legislature passed a near-total ban (S3100A) in 2023, and Governor Hochul vetoed it on December 22, 2023. S4641A passed the Senate on June 9, 2025, and S9759, substantively the same, passed the Senate on June 3, 2026. Both were referred to the Assembly Labor Committee with no later Assembly action, and neither is law.

What is the BDO Seidman test? It is the reasonableness standard from BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999). A restraint is enforceable only if it (1) is no greater than needed to protect a legitimate employer interest, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public. The Court also quotes Reed, Roberts as asking whether the covenant is reasonable in time and area, necessary to protect the employer's legitimate interests, not harmful to the public and not unreasonably burdensome to the employee.

How long can a non-compete last in New York? There is no fixed cap under current law. BDO Seidman enforced an 18-month restriction in part. The pending S4641A and S9759 would cap any permitted non-compete at one year and require payment of salary during the period of enforcement.

Are physician non-competes enforceable in New York? They can be. In Karpinski v. Ingrasci, 28 N.Y.2d 45 (1971), the Court of Appeals said covenants by physicians "are, if reasonable in scope, generally given effect," and enforced a covenant against an oral surgeon in part. The pending bills would bar non-competes for health related professionals regardless of income.

What is the $500,000 non-compete threshold in New York? It is the proposed exemption, not current law. Under S4641A and S9759, "highly compensated individuals" averaging $500,000 or more per year in W-2 and K-1 income, indexed from 2027, fall outside the ban. A permitted non-compete would still be limited to one year and require salary during the period of enforcement.

Does a ban apply to covenants I already have? Not under the bills as written. S9759 would apply to contracts entered into or modified on or after its effective date and would have no retroactive effect.

For the US statutes, regulations and court rules these laws sit in, see the US primary law API.

For a cross-state view, see our non-compete enforceability by state map. To compare Texas, see our Texas guide.

Arshita Anand

Co-Founder & CEO · Attorney

Arshita leads product and strategy at Vaquill AI, the US primary law data API. As an attorney, she decides which law we carry, how each section is sourced and cited, and what legal AI and compliance teams need from the data.