The New York Assembly recently passed a bill to entirely ban the use of non-compete agreements. The bill seemingly was introduced in response to the FTC’s proposed rule regarding non-compete agreements that was released in January of this year. The FTC defines a non-compete agreement as “a contractual term between an employer and a worker that blocks the worker from working for a competing employer, or starting a competing business, typically within a certain geographic area and period of time after the worker’s employment ends.”
If enacted, New York’s bill would amend the Labor Law to ban non-compete agreements for most employer-employee relationships in the State. On its face, the bill’s ban on non-compete agreements applies to both independent contractors and W-2 employees. The proposed bill may also mean an end to exclusivity contract terms, no longer allowing employers to restrict employees from taking on secondary employment.
The proposed bill also creates a private right of action which would prohibit more litigation against employers. Those claiming a violation of the law would be required to file suit within two years of when:
- The prohibited non-compete was signed.
- The individual learns of the prohibited non-compete.
- The employment or contractual relationship ends, or
- The employer attempts to enforce the non-compete, whichever is later.
If a violation exists, a court would be entitled to void the non-compete agreement and impose compensatory damages such as lost compensation, damages, and attorneys’ fees, but any liquidated damages awarded can’t exceed $10,000.
The proposed law doesn’t prohibit the use of contract terms that establish a fixed term of service, agreements that prevent the disclosure of trade secrets, confidential or proprietary client information, or customer non-solicitation agreements, and it will be prospective, not retroactive.
While the proposed law is just that – and is not effective or enforceable in New York yet – it bears notice given the pro-employee focus of both New York’s and the federal government. If you’re a human resources professional or entrepreneur with questions about this or other compliance issues, don’t hesitate to reach out at 716.839.9700 or firstname.lastname@example.org.