On June 20, 2023, the New York State Assembly passed a bill (A01278B) prohibiting all non-compete agreements (the “Bill”). The Bill defines a non-compete agreement to include any agreement between an employer and an employee or an independent contractor that “prohibits or restricts such [persons] from obtaining employment.”
The Bill purports not to affect the enforceability of agreements (a) for a fixed term (e.g., an employment agreement for a two-year period), (b) that prohibit the disclosure of trade secrets and confidential and proprietary information, and (c) that prohibit the solicitation of clients learned about during employment. The Bill does not differentiate between senior executives and low wage earners. The Bill does not expressly address agreements that (x) prohibit the solicitation of employers’ employees post-termination, or (y) contain notice periods (generally referred to as “garden leave”). Additionally, the Bill does not have a carve out for non-competition agreements in the context of a sale of a business.
The Bill prohibits employers, and their officers and agents, from seeking, requiring, demanding or accepting anon-compete agreement from employees or independent contractors. The Bill renders all such contracts void and permits employees and independent contractors to sue employers for seeking, requiring, demanding or accepting a non-compete agreement from them.The Bill also provides for liquidated damages up to $10,000, in addition to other compensatory damages and reasonable attorneys’ fees and costs for violations.
The Bill will only affect agreements entered into or modified after the Bill takes effect. The Bill has not yet been signed into law by Governor Hochul. If enacted, it would be one of the most restrictive non-compete laws in the country. If enacted, employers in New York (or employers elsewhere whose employment agreements have a New York choice of law provision) would be required to review their employment agreements to ensure they comply with the new law.
By: Leonard Weintraub, Meredith Cavallaro
and Molly R. Buckley (Summer Associate)