Jumping on the anti-noncompete bandwagon, the New York legislature has passed a measure banning noncompete agreements in the state.
Senate Bill S3100A prohibits employers from "seeking, requiring, demanding or accepting" a noncompete agreement from a "covered individual," defined as a person "who, whether or not employed under a contract of employment, performs work or services for another person on such terms and conditions that they are, in relation to that other person, in a position of economic dependence on, and under an obligation to perform duties for, that other person."
The term "noncompete agreement" is broadly defined to include "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."
A covered individual would have a private right of action against an employer, with two years to bring suit within the later date of when the prohibited noncompete agreement was signed, when the covered individual learns of the prohibited noncompete agreement, when the employment or contractual relationship is terminated, or when the employer takes any step to enforce the noncompete agreement.
In addition to having jurisdiction to void the noncompete agreement at issue, the court could provide a plaintiff with liquidated damages of up to $10,000, lost compensation, damages, reasonable attorneys' fees and costs, pursuant to S3100A.
The potential law is currently on Governor Kathy Hochul's desk. If she signs, the new law would take effect 30 days later, albeit with prospective effect, and not retroactive.
If the bill were enacted, New York would become the fifth state to ban employee noncompetes, joining California, Minnesota, North Dakota and Oklahoma.
Federal authorities have also taken an anti-noncompete stance, with National Labor Relations Board General Counsel Jennifer Abruzzo releasing a memorandum in May taking the position such provisions generally violate the National Labor Relations Act and the Federal Trade Commission proposing a ban on noncompete agreements earlier this year.
To read Senate Bill S3100A, click here.
Why it matters: The bill's passage signals the continued scrutiny of noncompete agreements by regulators and lawmakers, but for now, it remains on Gov. Hochul's desk, awaiting a signature.
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