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New York Poised to Ban Non-Competes: New Amended Bill Introduced

On May 31, 2023, New York introduced a new bill A01278B, which is an amended version of New York Bill A01278. This new bill adds one new provision to provide that New York law’s existing prohibition on employer non-competes remains effective until and only if bill A01278B is passed. All other proposed provisions contained in the original version, A01278, remain the same.


Summary of the Bill

Just like the original bill, A01278B introduces a new section, 191-d, to New York’s Labor Law. This new section of the New York ban on non-competes includes the following key provisions.


Definitions

The bill defines "non-compete agreement" as an agreement that prohibits or restricts a “covered individual” from obtaining employment after their current employment ends.


Section 191-d.(b) defines term “covered individuals” to mean “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.”


Banning Non-Compete Agreements

Just like the original version, this bill provides that no employer, including any of its agent, officers of any corporation, partnership, or limited liability company, are allowed to ask, require, demand, or accept a non-compete agreement from a covered individual.


Employee Remedies

As with the original version, an employee will have the right to sue any employer or persons who violate this new law. The employee will have 2 years to file suit from the later of (i) the date that non-compete was signed, (ii) the data the covered individuals learns that New York prohibits the use of the non-compete, (iii) the date that the relationship with the employer ends, or (iv) when the employer seeks to enforce the non-compete. In any such suit, the court can void the non-compete and order all other appropriate relief. An order of relief can include an injunction entered against the employer, and an award of damages, lost compensation, liquidated damages in an amount up to $10,000.00, and attorneys' fees, and costs for the employee.


Impact on Employer Protection of Legitimate Business Interests

As with the original version, this new bill will not affect any other provisions of New York law that allow employers to enter employment contracts or agreements to protect legitimate business interests, such as trade secrets, confidential information and proprietary client information, and the solicitation of the employer’s clients that the worker learned of while working for the employer. However, if any such agreements contain restrictive covenants (i.e., language restricting an employee from obtaining employment after their employment ends), that clause or provision, and perhaps the entire agreement if not properly crafted, would be invalid and unenforceable.


New Provision

Unlike the original bill, the new bill includes one new provision to clarify that New York's Labor Law, Section 202-K, prohibiting employer non-competes in the broadcasting industry remains effective until and only if amended bill A01278B is passed.


Severability

Like the original version, this new bill contains a severability clause in the event any part of the new section is held invalid. This means that if a court enters a judgement holding any part of the bill to be invalid (i.e., a particular clause, sentence, paragraph, or section), it will not affect the validity of the remaining provisions contained in the bill.


Closing Remarks

New York’s amended bill is currently in committee in the New York State Assembly. It is not yet clear whether the bill will be passed by the Assembly and the Senate. If passed, the effective date of the bill would be 30 days after it becomes law and will apply to contracts entered into or modified on or after that date. This new bill, just like the old bill, seeks to further level the playing field for workers by allowing them to move to new jobs without the fear of being sued by their former employee for breach of contract, and empowering them to seek court intervention in any such event.

 

The information provided in this article is for general informational purposes only. Nothing stated in this article should be taken as legal advice or legal opinion for any individual matter. As legal developments occur, the information contained in this article may not be the most up-to-date legal or other information.

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