This week, the New York legislature passed NY State Senate Bill 3100A to modify New York’s Labor Law to effectively bar non-compete agreements. The Bill’s effective date is 30 days after Governor Hochul’s signature, and will only apply prospectively to agreements signed, or effective, after the date the bill becomes law.
The bill bars non-compete agreements in total, except in two circumstances:
- Non-disclosure agreements that protect trade secrets, proprietary information and/or confidential information; and
- Agreements prohibiting solicitation of clients of the employer that the covered individual learned about during employment.
New York has included a private right of action allowing employees subject to an illicit agreement to sue an employer. Courts can award lost compensation, damages, attorney’s fees and liquidated damages up to $10,000.
With the passing of this bill, New York is likely to join California, Minnesota, North Dakota, Oklahoma, and the District of Columbia as states/districts that bar non-competes. Several other states, including Maryland, prohibit non-compete agreements unless the employee subject to the agreement earns above a certain threshold. Additionally, as Cliff Geiger recently blogged, the National Labor Relations Board has effectively called non-compete agreements illegal under the National Labor Relations Act. And finally, in January 2023, the Federal Trade Commission proposed a rule to bar non-compete agreements. A final FTC rule is expected within the next 12 months.
It is clear that non-compete agreements are on the chopping block as more states enact legislation to limit agreements, or bar non-compete agreements outright. This creates a lot of difficulty for businesses who employ individuals in multiple states or operate in multiple locations. If you need advice on your business’s non-compete agreements, please reach out to the attorneys at Kollman & Saucier, P.A.