On June 7, 2023, the New York State Senate passed Bill S.3100A entitled "Prohibits non-compete agreements and certain restrictive covenants."
Here are some of the highlights of the bill:
Highlights of the Noncompete Ban
Section 1. The labor law is amended by adding a new section 191-d to read as follows:
§ 191-D. Non-Compete Agreements. 1. for the purposes of this section, the term:
(a) "non-compete agreement" means any agreement, or clause contained in any agreement, between an employer and a covered individual that prohibits or restricts such covered individual from obtaining employment, after the conclusion of employment with the employer included as a party to the agreement; and
(b) "covered individual" means 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.
3. Every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.
4. (a) a covered individual, may bring a civil action in a court of competent jurisdiction against any employer or persons alleged to have violated this section. A covered individual shall bring such action within two years of the later of: (i) when the prohibited non-compete agreement was signed; (ii) when the covered individual learns of the prohibited non-compete agreement; (iii) when the employment or contractual relationship is terminated; or (iv) when the employer takes any step to enforce the non-compete agreement. The court shall have jurisdiction to void any such non-compete agreement and to order all appropriate relief, including enjoining the conduct of any person or employer; ordering payment of liquidated damages; and awarding lost compensation, damages, reasonable attorneys' fees and costs.
(b) for the purposes of this subdivision, liquidated damages shall be calculated as an amount not more than ten thousand dollars. The court shall award liquidated damages to every covered individual affected under this section, in addition to any other remedies permitted by this section.
5. Nothing in this section shall be construed or interpreted as affecting any other provision of federal, state, or local law, rule, or regulation relating to the ability of an employer to enter into an agreement with a prospective or current covered individual that establishes a fixed term of service or prohibits disclosure of trade secrets, disclosure of confidential and proprietary client information, or solicitation of clients of the employer that the covered individual learned about during employment, provided that such agreement does not otherwise restrict competition in violation of this section.
6 § 3. This act shall take effect on the thirtieth day after it shall have become a law and shall be applicable to contracts entered into or modified on or after such effective date.
The Takeaways
Given the current makeup of the New York State government, it's certainly fair to expect that this bill will ultimately pass the New York State Assembly, and be signed into law by Governor Huchul. While at first blush this anticipated new law would theoretically have a dramatic impact on litigation over these kinds of cases, I suspect that it will have surprisingly little impact, because as a practical matter, the true focal points of these kinds of cases tend to be arguments over nonsolicitation of a former employer's clients, and misappropriation of confidential and proprietary information rather than seeking injunctive relief over the purported violation of a noncompetition clause.
That being said, and at a minimum, employers would be very well advised to review their existing agreements with their personnel, and in the event this statute becomes New York law, to be prepared to issue a written revocation of those sections of their employees' agreements containing a noncompete clause.
