Overview: New York's Balanced Approach
New York takes a middle-ground approach to employee NDAs and restrictive covenants. Unlike California's near-total ban on non-competes, New York allows them but applies a strict "reasonableness" test. Courts balance employer interests in protecting confidential information against employee rights to earn a living.
For employee NDAs specifically, New York courts are generally favorable to enforcement when the agreement protects legitimate trade secrets and confidential information. However, overly broad restrictions and those lacking adequate consideration may be modified or voided.
Legislative Watch: Potential Non-Compete Ban
New York has repeatedly considered legislation to ban or severely restrict non-compete agreements. While Governor Hochul vetoed a near-total ban in late 2023, similar legislation continues to be proposed. Employers should stay updated on potential changes and draft agreements that remain enforceable under various scenarios.
New York's Non-Compete Rules
New York courts apply a three-part test to determine whether a restrictive covenant (including non-competes tied to NDAs) is enforceable:
New York's Three-Part Test
- Necessary to protect legitimate business interests: The restriction must protect trade secrets, confidential information, or unique/extraordinary services
- Reasonable in time, geography, and scope: Restrictions must not be broader than necessary to protect the employer's interests
- Not harmful to the public: The restriction cannot unduly burden the public interest or the employee's ability to earn a living
What Courts Consider "Reasonable"
| Factor | Typically Reasonable | Potentially Problematic |
|---|---|---|
| Duration | 6 months - 2 years | 3+ years (unless exceptional circumstances) |
| Geographic Scope | Areas where employer actually does business | Nationwide/worldwide without justification |
| Activity Scope | Specific competitive activities | All work in the industry |
| Customer Restrictions | Customers employee actually worked with | All customers regardless of relationship |
Blue Pencil Doctrine
New York courts may "blue pencil" overly broad restrictive covenants, meaning they can strike unreasonable provisions while enforcing the reasonable remainder. However, courts are increasingly reluctant to rewrite poorly drafted agreements for employers. The safer approach is to draft reasonable terms from the start.
Blue Pencil Limits
Courts will only blue pencil by removing or reducing provisions, not by adding terms or substantively rewriting the agreement. An agreement that requires wholesale rewriting may be voided entirely rather than reformed.
Consideration Requirements
New York requires valid consideration for any restrictive covenant to be enforceable. The consideration requirements differ based on when the agreement is signed:
For New Employees
- Offer of employment is sufficient: Signing as a condition of the job offer provides adequate consideration
- Must be signed at or before starting: If signed after employment begins, it's treated as a mid-employment agreement
- Document the timing: Keep clear records showing the agreement was signed before the start date
For Existing Employees
This is where New York differs significantly from some other states. For existing employees, continued employment alone is generally NOT sufficient consideration. You need additional consideration such as:
- Promotion: A meaningful change in position and responsibilities
- Salary increase: A raise accompanying the new agreement
- Bonus: A signing bonus or special compensation
- Stock/equity grants: New equity compensation
- Access to new confidential information: Being brought into a new project with sensitive information
- Meaningful change in job duties: Substantial expansion of responsibilities
Consideration Trap
A common mistake is asking existing employees to sign updated NDAs without providing new consideration. Such agreements may be unenforceable even if the employee signs willingly. Always document what consideration is being provided.
Enforcement and NDA-Specific Issues
While New York's non-compete rules receive most attention, there are specific considerations for employee NDAs:
What New York NDAs Can Protect
- Trade secrets: Information meeting the legal definition under the DTSA and NY common law
- Confidential business information: Customer lists, pricing, strategies, financial data
- Technical information: Proprietary processes, formulas, software, designs
- Customer relationships: But beware of restrictions that effectively function as non-competes
What New York NDAs Cannot Do
- Function as hidden non-competes: Overly broad definitions that prevent working in the field
- Prevent discussing wages: Protected under federal and NY labor laws
- Silence harassment claims: NY law restricts NDAs that prevent disclosure of discrimination/harassment
- Block whistleblowing: DTSA protections and NY whistleblower laws apply
NY's Sexual Harassment NDA Restrictions
New York has specific restrictions on NDAs related to harassment and discrimination claims:
- NDAs in sexual harassment settlement agreements can only be included if the complainant prefers confidentiality
- The complainant must have 21 days to consider and 7 days to revoke
- Employers cannot require NDAs that prevent employees from discussing harassment as a condition of employment
- General NDAs cannot be used to silence harassment complaints to government agencies
DTSA Compliance
All New York employee NDAs should include the federally required DTSA whistleblower notice. Failure to include this notice limits the employer's available remedies, including the ability to recover attorney's fees or exemplary damages.
Best Practices for New York Employee NDAs
For Employers
- Time it right: Have new employees sign before they start work to ensure adequate consideration
- Be specific: Define confidential information with reasonable specificity
- Carve out general knowledge: Explicitly exclude general skills and industry knowledge
- Document consideration for existing employees: Record what additional consideration is being provided
- Include required notices: DTSA whistleblower notice and any NY-specific requirements
- Separate NDAs from non-competes: Consider keeping confidentiality and non-compete provisions in separate agreements
- Review regularly: Update templates as NY law evolves
For Employees
- Review timing: Note whether you're signing before starting or during employment
- Check consideration: If signing mid-employment, confirm what you're receiving in exchange
- Watch for overbreadth: Flag definitions that seem to cover all your knowledge or skills
- Negotiate when possible: New York's balanced approach means negotiation is often welcome
- Keep copies: Retain signed copies of all agreements
- Understand your rights: Know what you can still discuss (wages, harassment, illegal activity)
New York City Considerations
If your business operates in New York City, there are additional considerations:
- NYC Human Rights Law: Additional protections against harassment-related NDAs
- Freelance Isn't Free Act: Requirements for written contracts with freelancers (may affect contractor NDAs)
- Salary transparency: NYC requires salary ranges in job postings, which may affect how compensation-related information is treated in NDAs
Generate a New York-Compliant Employee NDA
Our generator creates agreements tailored to New York's requirements, including proper consideration documentation and required notices.
Create New York NDAKey New York Cases
Understanding how New York courts have ruled helps predict how your NDA will be treated:
- BDO Seidman v. Hirshberg (1999): The leading NY Court of Appeals case establishing the three-part test for restrictive covenants. Emphasized that non-competes are enforceable only to protect legitimate interests.
- Brown & Brown v. Johnson (2011): Addressed enforceability of non-solicitation provisions, finding that customer restrictions must be tied to actual relationships developed during employment.
- Scott, Stackrow & Co. v. Skavina (2015): Confirmed that courts will not rewrite excessively broad restrictive covenants but may blue pencil discrete provisions.
Remote Workers and Choice of Law
For remote workers, the question of which state's law applies can be complex:
- New York residents working remotely: New York law will likely apply regardless of employer location
- Out-of-state employees working for NY employers: The employee's home state law may apply to enforce employee protections
- Choice of law provisions: New York courts generally honor reasonable choice of law provisions, but not if they would violate NY public policy for NY residents
Practical Tip
If you have employees across multiple states, consider creating state-specific NDA versions or ensuring your standard NDA complies with the most restrictive applicable state law. For remote workers, document their primary work location.