On June 20, 2023,the New York State Assembly voted in favor of Bill No. S03100, which would“[prohibit] non-compete agreements and certain restrictive covenants;[authorize] covered individuals to bring a civil action in a court of competent jurisdiction against any employer or persons alleged to have violated such a prohibition.” The bill then moved to Governor Kathy Hochul, who on December 22, 2023, declined to sign the legislation.
Bill No. S03100defined a non-compete agreement as, “any agreement, or clause contained in any agreement, between an employer and a covered individual that prohibits or restricts such covered individual from obtaining employment, after the conclusion of employment with the employer included as a party to the agreement.”
Further, Bill No.S03100 defined those covered individuals as, “any other person who, whether or not employed under a contract of employment, performs work or services for another person on such terms and conditions that they are, in relation to that other person, in a position of economic dependence on, and under an obligation to perform duties for, that other person.” This broad prohibition, if signed into law, would have voided any contract, to the extent a provision restrained a party from engaging in any kind of lawful profession, trade or business.
New York Governor Hochul could not agree with the legislature’s “one-size-fits-all” approach. Had New York signed this bill into law, it would become the fifth state to provide a complete prohibition on non-compete agreements, joining California, North Dakota, Oklahoma, and Minnesota.
While New York decided to protect employers' business interests in protecting confidential and proprietary information for the time being, the Federal Trade Commission continues to contemplate a nationwide ban on restrictive covenants with a decision expected in early 2024.
Recommendations Continuing Forward
Employers should continue to monitor proposed and existing legislation in the states within which they operate, as well as any federal legislation, to forecast any potential issues with their current non-compete and non-solicitation practices. Additionally, employers should assess their current non-compete agreements against any legislation already in place.
*If you have questions relating to the proposed bans of non-compete agreements, restrictive covenants, or any other labor and employment law issues, please contact Zashin & Rich’s Non-Compete/Trade Secret Practice Leader, Ami Patel (ajp@zrlaw.com) at (216) 696-4441.