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New York Passes Bill to Ban Post-Employment Noncompete Agreements

06 Jul

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Update applicable to:

All employers in New York

What happened?

On June 7, 2023, the New York State Senate passed new sweeping legislation, Senate Bill S3100A (the “Bill”), which would ban post-employment noncompete agreements in New York.

What are the details?

As of June 27, 2023, the bill has been submitted to its third ready at the New York State Assembly. If passed in the New York State Assembly and signed by the Governor, the ban would become effective 30 days later.

Should the Bill become law, it would prohibit employers from seeking, requiring, demanding, or accepting a post-employment “non-compete agreement” from any “covered individual.” The Bill defines a “non-compete agreement” to mean “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.” The Bill also defines “covered individuals” broadly, meaning “any other 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.”

Notably, this law would be broader than similar laws in California and Minnesota, and the proposed rule issued by the Federal Trade Commission earlier this year, insofar as there is no exception for noncompete agreements arising out of a sale of a business.

With respect to other common restrictive covenants, the Bill explicitly states that it does not prohibit nondisclosure agreements and client non solicitation agreements so long as such agreements do not otherwise restrict competition in violation of the Bill. It is also unclear whether this ban would invalidate current noncompete agreements (as the FTC seeks to do in its proposed rule).

For more information, please see the links below:

Senate Bill Page

Law Firm Article

What do employers need to do?

While New York employers are not required to take any immediate action, if the Bill becomes law, employers will need to work with their employment attorneys to review employment and independent contractor agreements to remove noncompete provisions. The status of the bill can be tracked via the above link.

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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.

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