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Yellow Alert: New York Legislature Passes Sweeping Non-Compete Ban

6/23/2023

New York Legislature Passes Sweeping Non-Compete Ban
Ask the NY Governor to Veto Now

On Tuesday, June 20, 2023, the New York State Assembly approved a bill – S3100A – passed by the NY State Senate earlier this month, which would broadly ban all non-compete agreements in the State going forward.

The bill now heads to Governor Hochul’s desk and it will become effective within 30 days of her signature, if she signs the bill into law. If it is signed into law, it would be the broadest ban on non-compete agreements in the United States and it has no owner/business sale or other exceptions.

There are reports, however, that Governor Hochul may be considering a veto of the bill. We encourage members in New York to tell the Governor she should veto the bill given the huge negative impacts on ownership structures and agency valuations the law will have on New York insurance agency owners.

If you would like to weigh in, we recommend sending your letter as soon as possible. You may use the template communication and submit your letter to the Governor via this online form.

You may also email her chief of staff and counsel at the addresses below:
If signed into law, S3100A would completely bar the use of non-compete agreements in the State going forward. As noted above, there is no express exception for the use of non-compete agreements for business owners or in conjunction with the sale of a business – exceptions that are included even under California’s extensive non-compete ban. The law does define a non-compete agreement as one between an employer and a covered individual but some experts have raised concerns that a provision of the bill stating that…

“Every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void[.]”  

…will be read to bar the use of non-compete agreements in all cases, including with respect to the sale of a business. The bill does expressly exempt non-solicitation and non-disclosure agreements from the ban.

The bill defines a “non-compete agreement” as “any agreement, or clause contained in any agreement, that prohibits or restricts a worker from obtaining employment after the conclusion of employment with the employer included as a party to the agreement.”

The bill defines a “covered Individual” who may not be subjected to a “non-compete agreement” as “any other person who, whether or not employed under a contract of employment, performs work or services for another person on such terms and conditions that they are, in relation to that other person, in a position of economic dependence on, and under an obligation to perform duties for, that other person.”

The law also creates a private right of action for any covered individual to bring a civil claim within two years against an employer or any other persons in violation of the law. The court must award liquidated damages to every covered individual affected in an amount not to exceed $10,000. The court may also award any other permitted remedies.
Unlike the FTC’s proposed non-compete rule, the law is not retroactive and would therefore not require rescission or notification for those currently subject to existing non-compete agreements. Only non-compete agreements signed or modified after the effective date would be barred by the law.

Contact Joel Kopperud, SVP of Government Affairs, with questions.