A bill banning non-compete agreements in New York was passed this week by the New York State Legislature. In this installment of LaborSpeak, we discuss the potential ramifications for employers if it is signed into law by the governor.
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Transcript
This week, the New York State Legislature passed a bill that would ban non-competes in New York It now heads to the Governor to decide if it will be signed into law. If signed, it would take effect 30 days later. The governor has previously supported the idea of limiting non-competes in New York. We anticipate the bill may get signed, even though, in its current form, it goes further than what many were expecting.
We understand that certain groups have already reached out to the Governor's office to advocate for limits to the bill before it becomes law, such as the salary thresholds we have seen in other states. The bill, as currently drafted, would ban employers from entering into non-competes with anyone who performs services for them. There are no salary thresholds, exemption for certain positions, or carve outs for the sale of business or equity awards. The bill also copies language from California's non-compete statute, stating that any contract clause that restrains someone from engaging in a profession, trade or business is void. This is relevant because this same language has been interpreted by California courts to also prohibit certain forms of non-solicit and confidentiality covenants. Individuals would have the right to file a lawsuit for any violation. They could recover lost compensation, liquidated damages up to Ten Thousand Dollars, and attorneys' fees and costs.
There's some conflicting language about whether the ban is intended to be prospective, or retroactive. The bill summary states it's intended to void current non-compete agreements, but other language says it would only apply to contracts "entered into or modified" 30 days after it's signed into law. This bill would alter the restrictive covenant landscape in New York. It's part of the nationwide trend against non-competes that we've discussed in prior videos.
We'll continue to keep you updated. Employers that use non-competes in New York should reach out to discuss alternatives and what this could mean for their agreements.