Bill Approved by Legislature and Awaits Governor’s Signature
In early 2023, the U.S. Federal Trade Commission proposed a rule that would prohibit most noncompete agreements (and would be applied retroactively to all non-competes). Following the FTC’s lead, the U.S. Congress is considering a federal law that would render most such agreements void and unenforceable.
The New York legislature, though, opted not to wait for a federal law banning noncompete agreements and enacted its own ban (Senate Bill S3100A), approved on June 23, 2023. The bill has been sent to Governor Kathy Hochul, but has not yet been signed. If enacted into law, it would make New York the fifth state to impose a significant ban on noncompete agreements. The law will go into effect 30 days after the governor signs it, but will only apply prospectively to agreements entered into on or after that date.
How the New York Law Would Regulate Non-Compete Agreements
If approved by the governor, Senate Bill S3100A would add a new provision to New York labor law, making it illegal for employers to mandate or even ask for a non-compete agreement from persons who are in any “position of economic dependence on, and under an obligation to perform duties for” the employer. Because of the lack of specificity in the proposed statute, many legal experts believe it could also be applicable to independent contractors.
How Does the Statute Define a Non-Compete Agreement?
The statute defines “non-compete agreement” broadly. It may take the form of a dedicated “non-compete” agreement or may apply to a clause within a broader employment contract. It includes any provision or agreement that limits, restricts of prohibits an employee from getting a job after the termination of employment with the employer.
Are Any Non-Compete Agreements Exempt from the Proposed Law?
Yes. The proposed statute cites three types of contracts that may include a non-compete clause:
- Agreements that protect confidential or proprietary information, including trade secrets
- Agreements that ban solicitation of customers or clients that the employee learned about during his or her employment
- Agreements that are for a “fixed term of service” with a specific employee
Let Stephen Hans & Associates Handle Your Employment Law Concerns
At Stephen Hans & Associates, our attorneys are glad to answer your questions and provide legal advice. Years of experience have provided us with extensive knowledge regarding employment law. We have successfully represented many employers throughout the greater New York City area in litigation involving workplace disputes. Our offices are conveniently located in Long Island City with easy access from Manhattan.