In a historic and unprecedented move that will affect millions of employers across the state, the New York Assembly and Senate have approved a bill that, if signed by Governor Kathy Hochul, will prohibit employers from entering into agreements of post-employment non-competes with employees. , independent contractors, or essentially “any other person who, whether or not employed under a contract of employment, performs work or services” for the employer. The proposed law will enter into force 30 days after the signature of the Governor, and will be applicable to contracts signed or modified from the date of entry into force.
If passed, the law would prohibit an employer, its agent or the officer or agent of any corporation, partnership, limited liability company or other entity from soliciting, requiring, requiring or accepting a non-compete agreement from any covered individual The proposed law further clarifies that a “covered person” is “in a position of financial dependence on that other person and is obligated to perform his or her duties.” A non-competition agreement includes any agreement or clause contained in any agreement between an employer and a covered individual that prohibits or restricts the individual from obtaining employment after termination of employment with the employer. In addition, the proposed law states that any contract by which “any person is limited to carrying on a legal profession, trade or business of any kind is to that extent void.”
Offering only a faint glimpse of comfort to employers, the bill does not prohibit an employer from entering into term-of-service agreements, agreements that protect the disclosure of trade secrets or confidential and proprietary customer information, or agreements that prohibit the solicitation of customers that the person met during employment, as long as the agreement does not “restrict competition.” Although the bill does not expressly address or include any exceptions for post-employment non-competes in connection with the sale of a business as the California statute does, the definition of “covered individual” seems to suggest that the restriction would only apply to a service provider such as an employee or independent contractor. Therefore, a logical reading of the proposed law would indicate that it is limited to the work context. However, it remains to be seen how a court will interpret it.
The bill provides a private right of action against employers for alleged violations, with available remedies of up to $10,000 in liquidated damages per affected individual and other possible relief, including voiding the non-compete agreement, requiring an employer’s conduct and receive lost compensation. damages and reasonable attorneys’ fees and costs. A covered person must bring the action within two years of the later of (i) when the prohibited non-compete was signed, (ii) when the person learns of the non-compete agreement competition prohibited, (iii) when the employment or contractual relationship is terminated, or (iv) When the employer takes any action to enforce the non-competition agreement.
While some states in recent years have banned non-qualifications for lower-wage workers or established other limitations, such as requiring an early review period or an award for enforcement, this bill goes a long way further than any law of the land in constituting a general prohibition of non-compete, as defined, without exception. If passed, the bill will constitute a major change to New York’s noncompete law and will have a far-reaching impact on employers, the employment documents they use and the post-employment restrictions they can impose.
