Generally our courts do not permit a current employee to compete with his employer based on the theory that the employee has a fiduciary duty not to compete and owes an obligation of loyalty to the employer. However, once the employment relationship is severed, different considerations apply.

The right of former employees to compete is another frequently litigated issue. New York, like most states, is not favorable to restrictions on a former employee‘s right to earn a living. Even where there is a written employment agreement that contains a restriction on the employee’s ability to compete with the former employer ("restrictive covenant"); courts are reluctant to enforce them absent a unique skill or special and key position of the former employee. However, New York Courts do not tolerate former employees competing by unfair competition, i.e. exploiting trade secrets of the employer, obtained during employment, and using them to unfairly compete with the former employer.

When a business is sold, the expectation of the purchaser, who is paying for the good will of the business, is that the former owner will not go back into competition with the buyer and solicit the customers. Thus, even when the purchase agreement does not spell out restrictions on competition, the law provides protection to the purchaser.