New York is on the Verge of Banning Non-Compete Agreements
Following a recent trend among state legislatures and the Federal Trade Commission (FTC), the State of New York is poised to ban most non-compete agreements, both in the employment context and possibly in the sale of a business. On June 20, 2023, the New York State Assembly approved legislation banning non-competes for employees and independent contractors. The new bill amends New York State Labor Law by adding a new Section 191-d, and the bill is currently awaiting Governor Hochul’s signature.
If signed into law, New York’s ban on non-competes would be broad and wide-ranging. Essentially, the law would prohibit non-competes for all New York employees and independent contractors, regardless of wage or position. The proposed law has a few exceptions. However, if enacted, the law would still allow employers to enter into agreements with employees that:
– Establish a fixed term of service
– Prohibit disclosure of trade secrets, confidential and proprietary customer information
– Prohibit solicitation of the employer’s customers that the employee learned about during employment, provided that the agreement is not so broad as to constitute a non-compete agreement.
Worth noting is that the law does not contain a carve out for non-competes in the context of a sale of a business. The New York ban, if signed into law, would apply only to agreements entered or modified after the effective date of the law.
The New York law furthers the slow erosion of non-compete agreements generally. Non-competes are currently banned entirely in California, Minnesota, North Dakota, and Oklahoma. Further, in January of 2023, the FTC proposed a new rule that would ban employers from imposing non-competes on their employees. The FTC described the imposition of non-competes as “a widespread and often exploitative practice that suppresses wages, hampers innovation, and blocks entrepreneurs from starting new business,” seemingly downplaying the harm that could befall an employer if a former employee leaves without restriction. The National Labor Relations Board and the Michigan Legislature are considering similar bans.
Consult with Levin Ginsburg attorneys to consider whether your company’s non-competes could withstand a challenge. Fill out our contact form and we will be in touch.