Seyfarth Synopsis: While New York State failed to pass a non-compete ban last year, a new bill in the New York City Council would eliminate non-compete agreements entirely, presenting new challenges and considerations for employers in the Big Apple.
On December 12, 2023, the New York State Legislature delivered a bill for the Governor's signature that would have banned "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." Governor Hochul vetoed that bill on December 22, 2023, and thus far there has been no further activity on this subject in the new Legislative term.
Stepping into the breach, two members of the New York City Council introduced a bill on February 28, 2024 that would ban all current and future non-compete agreements in the Big Apple. The bill broadly applies to "an agreement between an employer and a worker that prevents, or effectively prevents, the worker from seeking or accepting work for a different employer, or from operating a business, after the worker no longer works for the employer." The bill defines "worker" to include independent contractors and specifies that it is unlawful to merely attempt to enter into a non-compete agreement with any worker.
The bill further voids both current and future agreements, stating that"[a]ny non-compete agreement between an employer and a worker must be rescinded by the employer no later than the date the local law that created this section goes into effect." The bill also prohibits employers from representing to employees that they are subject to a non-compete agreement "where the employer has no good faith basis to believe that the worker is subject to an enforceable non-compete agreement." The bill's enforcement provisions include a $500 fine per violation. The bill would take effect 120 days after it becomes law.
The bill as written would almost certainly draw a number of legal challenges, including constitutional challenges given its applicability to existing contracts. However, the bill's prospects for passage are unclear. The New York City Council often makes waves with headline-popping employment law proposals that never get enacted. Almost a year ago, for example, a bill was introduced to ban at-will employment throughout the City. That bill failed to make any meaningful progress. Reportedly, Albany lawmakers will try again later this year to pass a statewide bill.
Whether the New York City bill, or a new New York State bill, advances toward the finish line – or if both falter – Seyfarth will continue to monitor and report on developments. In the meantime, please feel free to reach out to the authors of this alert, or your favorite Seyfarth attorney, if you have any questions.
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