Articles Posted in Agreements Not to Compete

  • The Federal Trade Commission is considering an administrative rule that would enact a broad ban on non-compete agreements that would prohibit contracts that restrict the employee from working for a competitor or starting a competing business.

  • The rule would also apply to ‘de facto’ non-competes, such as non-solicitation agreements, that have the effect of limiting a worker’s activities after employment.

  • The proposed rule will likely have a negative impact on the competitiveness and value of closely held businesses.  Non-competes in equity transactions would be prohibited unless the equity stake involved is at least 25 percent.


A proposed rule pending before the Federal Trade Commission would bar noncompete agreements across-the-board, and in a way that could bring some very profound changes to the business climate in this country.  If it is adopted in its present form, it likely will have a direct effect on the value of the investments of business owners in their own  businesses and make the smaller, privately held business less competitive.

This proposed rule is a big shift in resources from business owners to the employees.  It is something to watch and understand because of the effect it is likely to have if the proposed rule is adopted in its present form.  It’s controversial and has already run into opposition from the U.S. Chamber of Commerce.

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  • An agreement that barred a lawyer from soliciting clients within a geographic area was unenforceable after the lawyer left the firm under the rules governing the professional conduct of attorneys.

  • An agreement prohibiting a former associate attorney from soliciting clients of the firm after his resignation may be enforceable in New York, thus a case alleging a breach of that agreement could proceed to trial.

  • Attorney Rule of Professional Conduct 5.1 that prohibits restrictions on the practice of law is unlikely to shield non-attorneys who act on behalf of a lawyer from liability.


Can a lawyer be prohibited from soliciting the clients of his former firm? The general rule is that restrictions on the practice of law, including any non-competition agreements, are void and unenforceable.

It came as a surprise to me, therefore, that the appellate division in the first department in New York had affirmed the trial court’s decision that let a case go to trial alleging the breach of a non-solicitation agreement signed by a former lawyer.

The case is Feiner & Lavy v. Zohar. Here are the three most important holdings in the decision. First, an agreement prohibiting a former associate of a law firm from competing with his former employer within 90 miles of New York City was void and unenforceable. Continue reading

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