New York State Legislation Takes Aim at Non-Compete Clauses in Employment Contracts

On the heels of the Federal Trade Commission proposing rules that would lead to the prohibition of most non-competes, New York State has begun to push for its own regulations that would also broadly prohibit non-compete agreements as well.  Neither regulation regarding non-competes has been officially enacted yet, in fact, they still must make it through the State Assembly and be signed by Governor Kathy Hochul.  However, as days go on, the passage of either New York’s Bill No. S03100 (“S03100”) or Bill No. S6748, also known as the “Twenty-First Century Anti-Trust Act” (“S6748”), seems more likely to become a reality.  As such, knowing what these bills entail and what they may mean for employers and employees may be productive.

To start, we must understand how S03100 defines a non-compete agreement.  For S03100, a non-compete agreement is defined as an agreement or a clause within an agreement between an employer and worker that prohibits and/or restricts the worker from gaining employment following the conclusion of their employment with the employer.

Under S03100, no employer or agent of the employer or the officer or agent of any corporation, partnership, limited liability company, or other entity shall seek, require, demand, or accept a non-compete agreement from current or prospective workers.  If an individual wishes to take action for the violation of this law, it must be brought within two years of: (i) when the prohibited non-compete was signed; (ii) when the individual learned of the prohibited non-compete; (iii) when the employment or contractual relationship between the worker and employer was terminated; or (iv) when the employer takes any step to enforce the non-compete.

Similar to the language of S03100, S6748 defines a non-compete agreement as a contractual term between an employer and a worker that prevents that worker from seeking or accepting employment with a different person or operating a business following the conclusion of their employment or contractual relationship with the employer.  However, S6748 distinguishes itself from S03100 by going a bit further, as it also prohibits “de facto non-competes,” which include (i) non-disclosure agreements that effectively preclude the worker from working in the same field following termination and (ii) any clause that requires a worker to reimburse the employer for certain training costs if the worker’s employment terminates within a specified period.

As you can see, while ultimately, S6748’s impact will be similar to S03100’s impact, the underlying aim of S6748 differs.  S6748’s goal is to prohibit monopolies, monopsonies, and restraints on trade.  Most importantly, if S6748 were to pass, its impact would be retroactive.  More specifically, if S6748 were to be passed in its present state, any existing non-compete agreements in New York would become invalid 180 days following the law’s enactment date, and employers would be required to rescind any such agreements and send notice to both current and former workers who were subject to such agreements.

We will continue to monitor the status of both of these bills; however, it is important to note that regardless of the ultimate outcome of these bills, it is significant that New York has decided to take such bold steps towards safeguarding the rights of workers by pushing bills that restrict non-compete agreements.  If passed, these bills will ensure that workers have the freedom to explore better job opportunities without the fear of potential legal repercussions from their previous employers.  This is a meaningful move towards the further promotion of fair and equitable employment practices and the protection of workers’ rights.

If you have questions on your non-compete agreement and it’s applicability under these new bills, contact Borrelli & Associates, P.L.L.C., to schedule a free consultation through one of our websites, www.employmentlawyernewyork.com, www.516abogado.com, or any of our phone numbers: (516) 248-5550, (516) ABOGADO, or (212) 679-5000.