Many employment contracts contain non-competition clauses. There has long been a body of case law limiting the enforceability of these restrictive covenants in New York. For example, under the so-called BDO Seidman test, a non-compete provision is only enforceable if it is no greater than required to protect the legitimate business interests of the employer, does not impose undue hardship on the employee, and is not injurious to the public. See generally BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999).
The BDO Seidman test and other judicially created rules governing non-competition clauses may soon fall by the wayside. On January 5, 2023, the Federal Trade Commission (FTC) issued a proposed rule (PR) that would largely ban non-competition provisions throughout the United States. The PR follows an executive order issued by President Biden on July 9, 2021, which urged the FTC to “curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.”