Understanding NDAs and Non-Compete Agreements in New York: What Founders and Employers Need to Know in 2026

As an employment lawyer, I’ve seen a growing number of business owners and founders grappling with the evolving landscape of non-compete agreements—especially as laws shift in states like New York and California. With new legislation on the horizon, it’s more important than ever to understand the difference between non-disclosure agreements (NDAs) and non-competes, and how each can impact your business.

What’s the Difference Between an NDA and a Non-Compete?

Non-Disclosure Agreements (NDAs):

NDAs are legal contracts designed to protect confidential information. They are critical for founders, inventors, and anyone in the early stages of building a business or developing an idea. When speaking with potential investors, partners, or collaborators, NDAs help ensure that trade secrets, proprietary information, and business strategies remain protected. In these contexts, NDAs are commonly used to prevent parties from misusing or disclosing sensitive information they learn during their dealings.

Non-Compete Agreements:

Non-competes, on the other hand, are contracts that restrict an individual’s ability to work for a competitor or start a competing business for a certain period of time and within a specific geographic area after leaving a job. While NDAs are widely accepted and enforceable, non-competes are increasingly disfavored—especially in New York—because they can prevent people from seeking new employment and advancing their careers.

Why Are Non-Competes Under Scrutiny?

Non-compete agreements have come under fire because they often go beyond protecting legitimate business interests and instead limit a person’s right to work. Overly broad restrictions—such as banning someone from working in their field for a year or from joining “any competitor”—are rarely upheld in court. In New York City, for example, even a 15-mile radius restriction is seldom enforced. California has already made most non-competes unenforceable, with very limited exceptions.

The Current Legal Landscape in New York (2026)

New York is actively considering major changes to its non-compete laws. In 2025-2026, Senate Bill S4641 was introduced to ban most non-compete agreements for workers, with significant exceptions for high earners and those involved in the sale of a business.

Key Aspects of the Proposed New York Non-Compete Law (S4641):

• Targeted Ban: The bill aims to prohibit employers from requiring or enforcing non-compete agreements for most employees, independent contractors, or “covered individuals.”

• High-Earner Exception: Non-competes may still be allowed for “highly compensated individuals,” defined as those earning at least $500,000 per year (adjusted annually).

• Sale of Business: Non-competes related to the sale of a business are generally exempt from the ban.

• Permissible Restrictive Covenants: Employers can still use agreements to protect trade secrets, confidential information, or to prohibit solicitation of clients.

• Effective Date: If enacted, the law would take effect 30 days after signing and apply only to new or modified agreements—not retroactively.

• Private Right of Action: Employees would have the right to sue employers who violate the law.

Following the 2023 veto of a stricter, total ban, this new proposal was designed to be more acceptable to the governor by adding the high-earner threshold. Until this bill passes the Assembly and is signed into law, New York courts continue to analyze non-competes based on reasonableness—requiring them to protect legitimate business interests without being unduly burdensome.

Why NDAs Remain Essential for Founders

While non-competes face increasing legal challenges, NDAs remain a vital tool for founders and inventors—especially in the early stages of developing an idea or business. When discussing your concept with potential investors, partners, or service providers, an NDA can help safeguard your trade secrets and proprietary information. NDAs are not designed to restrict employment opportunities, but rather to ensure that your confidential information is not misused or disclosed without your consent.

Practical Takeaways for Business Owners

• Review Your Agreements: The legal landscape is changing fast. Don’t wait until you’re in a dispute to review your contracts.

• Tailor Your Restrictions: If you use non-competes, make sure they are narrowly tailored—reasonable in scope, duration, and geography—and truly necessary to protect your business interests.

• Use NDAs Strategically: NDAs are essential for protecting confidential information, especially when sharing sensitive details with outsiders.

• Seek Legal Guidance: Invest in legal advice up front to ensure your agreements are enforceable and fair to all parties.

Have questions about NDAs or non-compete agreements in New York? Let’s connect—I’m here to help you navigate these changes and keep your business secure.