Update applicable to:
All employers operating in New York
The New York State Assembly and Senate have passed bills that, once signed into law, will create a new section in the New York State Labor Law (Section 191-d) that will make non-compete agreements unlawful in New York.
What are the details?
The proposed legislation would amend the New York Labor Law to prohibit the signing or modification of non-compete agreements after the effective date.
The law allows employees who are subject to non-compete agreements to sue their employers in state court. The law specifically targets non-compete agreements that restrict employees from obtaining employment after leaving their current employer. It extends beyond traditional employees and includes “covered individuals” who are economically dependent on their employers.
Employees and contractors would have the right to sue their employers within two years of several triggering events related to the non-compete agreement. The court may void the non-compete and award the plaintiff lost compensation, damages, attorney’s fees and costs, and liquidated damages of up to $10,000.
However, it remains unclear what damages a plaintiff can claim under this provision since the bill renders non-compete agreements unenforceable. The bill does not affect non-disclosure agreements protecting trade secrets and confidential information or agreements prohibiting the solicitation of clients learned during employment, and existing agreements will not be affected.
The proposed law does not mention employee non-solicitation agreements, but it does state that existing federal, state, and local laws regarding enforceability of these agreements would still apply. The bill differs from the proposed ban on non-competes by the Federal Trade Commission in that it lacks a sale-of-business exception, does not require the rescission of existing non-competes, and does not require employers to notify individuals of voided non-compete agreements.
For more information, please see the links below:
What do employers need to do?
Governor Kathy Hochul is expected to sign the bill. If signed, the law will go into effect 30 days later and will invalidate employers’ ability to enter into new non-compete agreements at that point. The Harris Beach law firm advises businesses utilizing non-compete agreements to review their practices with experienced Labor & Employment counsel. Even if non-compete agreements are invalidated, other strategies can help protect businesses’ proprietary information and their investment in talent.
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