New York Proposes Bill to Limit Non-Compete Agreements

News Summary

Lawmakers in New York have introduced Senate Bill 4641A, aiming to ban most non-compete agreements. Unlike previous iterations, the bill includes exceptions for high-income earners and certain healthcare professionals. It allows affected employees to seek legal action against violators, with potential damages up to $10,000. This legislation would align New York with California’s strict non-compete policies, marking a significant shift in employment law and offering stronger protections for employees.

New York – On February 10, 2025, lawmakers in New York introduced Senate Bill 4641A, a revised proposal aimed at banning the majority of non-compete agreements in the state. This bill comes after a previous version was vetoed by Governor Kathy Hochul in late 2023. Unlike its predecessor, which sought to impose a blanket ban, the new legislation allows for certain exceptions, primarily affecting high-income earners and specific healthcare professionals.

Under the stipulations of Senate Bill 4641A, employers in New York will be prohibited from seeking, requiring, demanding, or accepting non-compete agreements from covered individuals. More critically, any non-compete agreements entered into after the bill’s effective date will be designated as null, void, and unenforceable. The bill empowers affected employees to pursue a private right of action against employers who violate this prohibition, potentially recovering damages of up to $10,000 per violation, in addition to attorney’s fees and associated costs.

Exceptions to this ban apply primarily to individuals whose compensation exceeds $500,000 annually and to certain healthcare professionals. Furthermore, non-solicitation agreements will remain enforceable under this new legislation, allowing businesses to protect their revenue streams without relying on non-compete clauses.

If enacted, the bill would position New York alongside California’s strict policies on non-compete agreements, creating a sharp contrast with neighboring states such as New Jersey, Connecticut, and Pennsylvania, where such agreements are enforceable under reasonable circumstances. This change is particularly significant given New York’s robust financial sector, where many companies have traditionally relied on non-compete agreements as a means to safeguard sensitive internal knowledge, intellectual property, and business strategies.

Participants in the workforce will be notified of their rights under this new bill, as employers will be required to post a notice provided by the New York Department of Labor. It is essential to note that the legislation will not retroactively impact existing non-compete agreements but will apply only prospectively to new agreements initiated after its effective date. Non-compete clauses applicable to the sale of a business are also explicitly excluded from this ban, thereby maintaining the enforceability of such agreements in those specific contexts.

The New York Senate committee is currently in the process of reviewing Senate Bill 4641A. For the bill to become law, it must obtain passage in the legislature and receive the governor’s signature. If passed, employees affected by any violations of the ban will have a window of up to two years to file a civil action against their employers, initiating legal remedies based on new rights afforded by the legislation.

Another critical provision of the bill prohibits invalidating the ban through choice-of-law or choice-of-venue provisions, ensuring that any attempts by employers to circumvent the law will not be recognized or enforced in New York. This will further bolster the protections afforded to employees under the proposed framework.

In conclusion, as New York legislators advance this bill, which aligns the state’s approach to non-compete agreements with more employee-friendly regulations witnessed in California, the implications for both workers and businesses will be significant, marking a considerable shift in employment law in the state.

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Additional Resources

• JD Supra: Re-Do Bill Would Fundamentally Change
• Wikipedia: Non-compete clause
• Morgan Lewis: New York State Senate Introduces Bill That Would Ban Non-Compete Agreements
• Google Search: Non-compete agreements
• Jackson Lewis: NYS Non-Compete Bill – What Employers Can Expect
• Encyclopedia Britannica: Employment Law
• National Law Review: New York Legislature Proposes New Bill Banning Non-Compete Agreements
• Google News: New York Senate Bill 4641A