New York may become the latest state to ban non-compete agreements after the New York State Assembly and Senate each passed legislation seeking to curtail their use by employers. This comes on the heels of a proposal by the Federal Trade Commission and action by several other states to restrict employers’ use of non-competes. However, unlike some other states’ recently enacted laws that prohibit non-compete provisions for lower wage workers or require certain notices for non-competes to be effective, New York’s proposed measure would, as drafted, prohibit all prospective non-compete provisions and create a cause of action for aggrieved individuals.
The contours of the law are not entirely clear, but as passed, the current version of the legislation (i) does not include a carve-out for non-competes in the sale of business context; (ii) explicitly exempts from coverage some other forms of commonly used restrictive covenant provisions such as client non-solicitation provisions (where the employee learned of the client relationship during employment) and non-disclosure agreements protecting businesses’ confidential information and trade secrets; and (iii) is silent on employee and service provider non-solicitation provisions. The law, if signed, would apply to only those agreements entered into after the law becomes effective.
The next step is for the bill to head to New York Governor Hochul’s desk for consideration. As of this writing, Governor Hochul has not indicated whether she will sign this measure as presently constituted, but in the past she has signaled support for a more limited ban for lower wage workers. If signed, the measure would become effective 30 days later.
We will publish a more comprehensive analysis shortly, while also continuing to monitor this legislation and report back as developments occur.