What happened?

On February 28, 2024, three bills were introduced to the New York City Legislature, which would ban all current and future non-compete agreements if enacted into law.

What are the details?

After Governor Hochul vetoed the bill that would ban all non-compete agreements and provisions for workers in New York on December 22, 2023 (Vensure update), three bills with the same objective were introduced into the New York City legislature.

1. Bill 140 – As it is on the bill:

• Current and future agreements would be void and forbidden, respectively.
• By its definition, employees and independent contractors would be covered by this law.
• A $500 fine would be imposed per violation.

2. Bill 146 – As it is on the bill:

• Will apply for non-competes on “low-wage employees,” defined as a “clerical or other worker” as defined in subdivision 7 of section 190 of the labor law.
• Employee as defined in subdivision 2 of section 190 of the labor law.
• Employer is defined as subdivision 3 of section 190 of the labor law.
• Does not have a fine for violations.

3. Bill 375 – As it is on the bill:

• Will apply only for freelance workers, defined as natural persons or an entity composed of a natural person (1 natural person).
• There are 4 exceptions (sales representative as defined in section 191-a of labor law, any person engaged in the practice of law, licensed medical professional, and any entity with admitted membership in the Financial Industry Regulatory Authority)
• For the agreement to be valid, the employer would have to pay a “…reasonable and mutually agreed upon sum…either biweekly or monthly for the duration of time for which the covenant…is in effect.” Failure to pay the agreed sum or on the frequency will render the covenant null and void immediately.
• Provides a right of action, statutory damages for $1,000 and civil penalties of $500 per violation.

Business Considerations

• Although not yet law, you should begin to review your current non-compete agreements or provisions and determine what actions you will need to take should any or all bills be enacted.
• These bills as drafted have the potential to severely impede employers from protecting their businesses and interests, so it would be wise to start looking at alternative options. To ensure you are protected from liability, seek legal counsel from your employment attorney for any necessary alterations that need to be made to your agreements and draft a contingency plan.
• Given the extremely broad language and lack of carveouts, it remains likely the bills will not pass as drafted. Vensure will be tracking these bills and provide an update when any of the are signed or vetoed, but you can also check the status by visiting the bill links below.

Resources

• Bill Int. 0140-2024
• Bill Int. 0146-2024
• Bill Int. 0375-2024

Source References

• New York Governor VETOED Bill That Would Ban Non-Compete Agreements (and Provisions) (VensureHR)
• New York City Council Introduces Three New Bills Aimed at Non-Competes (Proskauer Rose LLP)
• It’s No Competition: New York City Legislature Proposes Sweeping Non-Compete Bills (Duane Morris LLP)
• NYC Council Proposes Broad Non-Compete Ban (Seyfarth Shaw LLP.)

This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.