Noncompetition Agreements and Restrictive Covenants in New York

In June, the New York Senate approved this bill prohibiting noncompetition agreements and certain restrictive covenants. I wrote that the days of noncompetition agreements in New York “are as limited as the Knicks’ chances of winning another NBA title.”

Oops.

There are multiple reports, among them this one from Judy Greenwald at Business Insurance, that New York Gov. Kathy Hochul prefers not to sign Senate Bill 3100A and eliminate all noncompetes in NY.

Here’s more from Ms. Greenwald’s article:

At a press conference Thursday, according to a transcript provided by the governor’s press office, she said that while she cannot comment on specific legislation, “I have to strike the balance to make sure we take care of lower- and middle-income workers up to, say, $250,000,” while “those at higher levels are very well equipped to negotiate on their own.”

Senate Bill 3100A expressly prohibits agreements between businesses and covered individuals (employees, independent contractors, or “any other person who, whether or not employed under a contract of employment, performs work or services”) that prohibit or restrict them from obtaining employment after their job ends.

The noncompete ban is across the board, with no exception for individuals who reach a minimum earnings threshold.

Governor Hochul emphasized the importance of “protecting low and middle-income workers, giving them flexibility to have mobility to go from job to job as they continue up the ladder of success,” according to this report from Zach Williams and Chris Marr at Bloomberg Law.

The legislation carves explicitly out agreements that forbid the solicitation of clients and protect trade secrets and other confidential information.

The Bloomberg Law article notes that Governor Hochul would also like to see exceptions for higher earners.

“Those who are successful have a lot more negotiation power, and they’re at the industries that are an important part of our economy here in New York.”

The pending legislation is not retroactive. So, even if the Governor had signed it, the new law would not have impacted existing noncompetes. But now it appears that businesses will have a longer runway to enter into these agreements with employees, subject to existing laws governing the reasonableness of the restrictions.

And I will throw a few dollars on the Knicks to win the NBA title.