Non-Compete Law in NY

There has been much talk, nationally and locally, about non-compete agreements and their relative enforceability. We receive phone calls from prospective and current clients on the subject every day. We hope this blog can serve as a basic update on the current state of affairs with respect to non-compete agreements in New York and with respect to national and legislative trends.

For background, on July 9, 2021, President Joe Biden signed an Executive Order to address several key issues aiming to promote competition in labor markets and empower workers.[1] Specifically, the President emphasized the extensive use of non-compete clauses in private-sector businesses, impacting 36 to 60 million workers, and how these agreements can hinder competition and restrict workers' ability to seek higher wages and improved workplace conditions. In the order, President Biden encouraged the Federal Trade Commission (FTC) to use its regulatory authority to “curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.”[2]

Following President Biden’s Executive order, on June of 2023, the NY State Senate passed a Bill designed to ban all new non-competition agreements for workers in New York.[3] Those who supported this bill did so based upon the belief that non-compete agreements unfairly trap a wide range of workers, from low-wage employees to high-skilled professionals.

However, on December 22, 2023, Governor Hochul vetoed the bill asserting her belief that it was overly broad.[4] Instead of banning all non-competes, Governor Hochul wanted to narrow the bill's scope to protect only low-wage workers from these restrictive terms, while allowing corporations to continue to use non-competes for their top-earning, specialized staff. To do this, Governor Hochul pushed for income thresholds, which would allow non-competes to continue in contracts for employees earning more than $250,000 per year.

Governor Hochul’s veto set the stage for a continued debate on worker mobility and fair labor practices in New York. Given this ongoing debate, there may be renewed efforts by state legislators to reintroduce a modified version of the bill, potentially incorporating some of the amendments Hochul wanted, such as setting income thresholds.[5]

However, it is also possible, given the growing national movement against restrictive employment clauses, NY will model new policy after California’s employee-protective approach. Beginning on January 1, 2024, California made noncompete clauses in employment contracts largely unenforceable, regardless of the contract's origin.[6] California employers now have to tell current and former employees about these changes or face hefty fines, ensuring better protection for workers' rights.

The inconsistent approach of different States to non-competes, may also influence the FTC to consider national regulations on noncompete clauses. Federal action could override state laws and establish a uniform policy across the United States. Finally, there could also be an increased focus on judicial challenges to noncompete agreements, with more cases potentially being brought to courts to test the legal boundaries and interpretations of these clauses under current labor laws.

As this landscape of issues continues to change, The Boyd Law Group, PLLC remains happy to help and assist. Please feel free to call us to discuss your current non-compete agreement or one presented in your new job offer, and let us help take the worry out of your work.