UPDATE: On June 20, 2023, the New York State Assembly also voted in favor of this legislation, and the Bill is now headed to Governor Hochul. If signed by Governor Hochul, New York would become the fifth state to institute a broad ban of non-compete agreements (after California, North Dakota, Oklahoma, and Minnesota). The Bill would become effective 30 days after being signed into law. Please stay tuned for further updates on this quickly changing landscape in New York.
On June 7, 2023, the New York State Senate passed Bill No. S03100 (the “Bill”), which would impose a blanket ban on employee non-competition agreements in New York.
The Bill defines 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.
The Bill provides a private right of action for individuals who are subject to a prohibited non-compete, against an employer that “seek[s], require[s], demand[s], or accept[s] a non-compete from any covered individual,” and courts can order injunctive relief, liquidated damages up to $10 thousand per violation, and compensatory damages, including lost compensation and attorneys’ fees and costs.
The Bill explicitly states that it does not impact law applicable to agreements that:
establish[] a fixed term of service or prohibit[] disclosure of trade secrets, disclosure of confidential and proprietary client information, or solicitation of clients of the employer that the individual learned about during employment … .
The Bill still must pass in the New York State Assembly. If passed in the Assembly, the Bill will move to New York Governor Kathy Hochul, who will have ten days to sign the Bill into law, or to veto the Bill. In the past, Governor Hochul has supported limitations on non-compete agreements for low-wage employees. For example, in 2022, she pledged to propose legislation to eliminate non-competes for workers making below New York’s median wage, and to ban “no-poach” agreements under state antitrust law. However, the Bill goes far beyond the low-wage restrictions that are becoming more common across the country, and Governor Hochul’s position on an outright ban on non-competes as proposed in the Bill is unclear at this time.
The Bill is part of a broader emerging trend in various states and the federal government seeking to prohibit or limit employers’ use of non-compete agreements.
We will continue to monitor the status of the Bill and will provide updates on further developments.