New York Lawmakers Deliver Noncompete Bill to Governor Without High-Income Exception – Could Amendments Be in the Works? | Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

On December 12, 2023, New York lawmakers formally delivered a bill to Governor Kathy Hochul’s desk for signature that would ban nearly all types of noncompete agreements in employment. The legislature and governor’s office are now reportedly in the process of negotiating “chapter amendments” to the legislation. The governor has ten days to veto the bill or sign the existing legislation and continue negotiating chapter amendments.

Quick Hits

  • Governor Hochul has called for a noncompete agreement bill to be amended to include a carve-out to allow noncompetes for higher-income employees.
  • The bill, if approved without amendments, would prohibit employers from using noncompete agreements, regardless of an employee’s income.
  • The governor has ten days from December 12, 2023, to veto the bill or sign it and continue negotiating chapter amendments.
  • If chapter amendments are negotiated, it is unclear when the bill would take effect.

Lawmakers had passed the noncompete ban legislation, Bill No. S3100A, in June 2023, but had not formally delivered the bill to the governor for approval because of widespread concerns about the bill, including from the governor herself. Delivery to the governor’s desk triggers a ten-day period (excluding Sundays) for the governor to review it before it becomes law.

In November 2023, Governor Hochul had reportedly commented that she would support the noncompete ban for low- and middle-income workers, but wanted a carve-out for high-income earners, signaling that she would not support the noncompete bill as passed by the legislature.

In her comments, the governor stated that noncompetes for low- and middle-income employees would promote job mobility and flexibility, but said there needs to be “balance” in relation to high-income employees, suggesting they may have more “negotiation power.” According to reports, an annual income cap of $250,000 had been pushed by some business groups.

At that time, it was not clear whether there was support in the state legislature to amend the bill, with many groups pushing for it to be approved unchanged.

The bill would take effect thirty days after it is enacted.

As passed, S3100A would prohibit employers from requiring a covered employee to enter into a noncompete agreement that “prohibits or restricts such covered individual from obtaining employment.” The law would void “[e]very contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind,” entered into after the bill’s effective date.

The bill would further provide a private cause of action for covered individuals to challenge a noncompete agreement or the enforcement of a noncompete agreement. If found liable, employers could be subject to liquidated damages of up to $10,000 for each violation, payment for lost compensation, damages, and attorneys’ fees and costs.

New York would be the latest state to ban noncompete agreements and the bill would align it closer with California’s broad noncompete ban on nearly all types of noncompete agreements. The Federal Trade Commission is also considering a rule that would curtail the use of noncompete agreements.

Next Steps

Governor Hochul has raised hopes that New York lawmakers will amend the bill through chapter amendments which could include, among other things, an exception for high-income employees. Hochul still can veto the legislation, though it is unclear whether she will veto the bill or continue to discuss chapter amendments.

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