Unlike in the Ninth Circuit, in states comprising the Second Circuit, common law generally governs the use of restrictive covenants. Still, many of the specific factors for analysis in these states will be familiar, given the widely accepted “reasonability” standard for adjudicating the propriety of such agreements. Both the Vermont and N.Y. State Legislatures have introduced bills restricting the use of restrictive covenants, but to date, neither bill has passed. Vermont’s iteration, known as House Bill 556, would generally ban “agreement[s] not to compete or any other agreement that restrains an individual from engaging in a lawful profession, trade, or business.” The bill leaves carve outs for (1) restrictive covenants in the sale of an ownership interest in a business entity, or dissolution of a partnership, and (2) agreements formed to prohibit the disclosure of trade secrets. The New York law, known as Bill No. A07864A, takes a different approach. It outlaws any non-compete agreement purporting to limit an employee making less than $75,000 from seeking employment within a certain geographic area, for a specified period of time, with a particular employer or in a particular industry.
State | Law governing restrictive covenants | Restrictive |
