iFollowing the recent failed attempt at broadly banning non-compete agreements in New York statewide (discussed here), three new bills were just introduced to do the same, this time in New York City. The most comprehensive, Int. No. 140 , would create an outright ban on non-compete agreements for all New York City workers. Absent the passage of that bill, two others, Int. No. 146 and Int. No. 375, would focus on restricting non-competes for low wage and freelance workers, respectively.
Bill 140, the most far-reaching of the bunch, would not only bar employers from entering into non-competes with their employees moving forward, but would also require them to nullify any existing non-compete agreements. The bill would further prohibit employers from even representing to a worker that they may be subject to a non-compete “where the employer has no good faith basis to believe that the worker is subject to an enforceable non-compete agreement.” Importantly, the bill does not provide for a private right of action. Instead, if found in breach, the NYC Office of Labor Standards could subject an employer to a civil penalty of $500 per violation.
This New York City bill, like the New York State bill, is overly broad and lacks the carveouts (e.g. a sale of business exception) and other limitations (discussed more here), that led in part to Governor Hochul declining to sign the State bill into law.
Alternatively, bans on non-competes for low-wage employees and freelancers were also introduced. Bill 146 would prohibit employers from requiring low-wage workers, defined as a “clerical or other worker” under Section 190 of the New York Labor Law, or employees other than those employed in a bona fide executive, administrative, or professional capacity and earn at least $1,300 per week, to enter non-compete agreements with such employees. Crucially, the bill would create a disclosure requirement for non-low-wage prospective employees at the outset of the hiring process that they may be subject to a non-competition agreement.
Lastly, Bill 375 targets non-competes for freelance workers, broadly defined as “any natural person or any organization composed of no more than one natural person, whether or not incorporated or employing a trade name, which is hired or retained as an independent contractor by a hiring party to provide services in exchange for compensation,” excluding sales representatives as defined under section 191-a of the labor law, lawyers, doctors, and “any individual, partnership, corporation or other legal entity admitted to membership in the Financial Industry Regulatory Authority.” The bill bans the use of non-competes unless the agreement also requires the employer to pay a reasonable and mutually agreed upon amount to the worker on a semi-regular basis for the duration of the non-compete. Not only would Bill 375 open employers to the potential $500 fines per violation, but it would also create a private right of action for any aggrieved freelance workers, entitling them to a declaratory judgment banning the non-compete, attorney’s fees, and $1,000 in damages. The bill gives the City the additional ability to commence a civil action to target employers who display a pattern of violations, with penalties up to $25,000.
Will these bills suffer the same fate as the prior statewide bill aimed at banning non-competes? Or will non-competes be banned in New York City? And if so, in what form? Only time will tell. For now though, employers should continue to pay close attention to the ongoing efforts in New York State and City, and on a Federal level, to ban or otherwise limit non-competes and should plan their restrictive covenant strategies.
