New York lawmakers have reintroduced legislation that would prospectively ban most employment-related non-compete agreements. The bill (S4641A), follows Governor Hochul’s 2023 veto of a similar measure and incorporates key revisions to address previous concerns. If enacted, the law would take effect 30 days after being signed by the governor, invalidating new non-compete agreements while allowing existing ones to remain in place.
Key Provisions and Exceptions
The bill broadly defines a “non-compete agreement” and seeks to prohibit their use for most workers, with notable exceptions:
- Highly compensated individuals (earning $500,000 or more annually) may still be subject to non-competes, provided they do not exceed one year and include salary payments during the restriction period.
- Non-competes tied to the sale of a business remain permissible if the seller owns at least 15 percent of the business.
- Client non-solicitation agreements and trade secret protections are allowed, provided they do not unlawfully restrict competition.
Next Steps for Employers
Employers should monitor the bill’s progress and review current restrictive covenants to ensure compliance if the law is enacted. The bill also mandates conspicuous employee notices outlining non-compete protections, which would be developed by the New York Department of Labor.
HR Works will continue to monitor this topic and provide updates as more information becomes available.
