In what will likely be a sea change to existing law, the New York legislature passed a bill this week banning post-employment non-compete agreements. If Governor Hochul signs the bill, as she is expected to do, New York will soon join a host of other states restricting non-compete agreements.
Here are the key takeaways from the bill:
- The bill, which becomes effective 30 days after it is signed, would ban agreements that seek to prohibit a worker from competing with a company after the work relationship has ended.
- Although the Bill is not retroactive (meaning it will not automatically void existing non-competes that were entered into before it becomes effective), there is some ambiguity about whether employers will have difficulty enforcing non-competes that were signed before the bill passed. We hope that by the time the bill is signed there is more clarity on this point.
- There are some ambiguities in the law, but it appears that confidentiality agreements and agreements protecting trade secrets will still be permitted. The same goes for agreements prohibiting non-solicitation of clients and customers, but they must be limited to clients and customers the employees learned about through their employment (which generally formalizes the current approach taken by NY courts).
- The bill does not expressly mention employee non-solicitation (anti-poaching) agreements.
- Significantly, the bill allows workers to bring suit against a company if they are presented with an agreement that violates the law. In the event a violation is found, courts are required to award liquidated damages (not to exceed $10,000) and may void the agreement and award attorneys’ fees and costs and other damages. Significantly, this could include lost wages suffered by the employee.
This bill represents a sweeping change to the existing legal landscape in New York. And time is of the essence since the law will go into effect just 30 days after signature (which is expected). Companies should become familiar with the bill and consult with counsel about how to navigate these potential changes.
Please stay tuned for updates and live programming to further explain as developments occur. In the meantime, please reach out to the authors Jessica Shpall Rosen and George Vallas, or your contact at Greenwald Doherty LLP to discuss any questions you may have.