Non-competition agreements are fairly common in certain types of jobs and industries. Because they restrict an employee’s future employment prospects, typically, these contracts are limited in that they only apply for a specific length of time and/or a reasonable distance from the previous employer’s business location. However, in recent years, some states are going so far as to completely ban non-competes. Currently, such agreements are not enforceable in California, North Dakota, Oklahoma and Minnesota. Now, New York may be next.
What Is a Non-Compete?
A non-compete agreement, or a non-compete clause contained within an agreement, provides that an employee may not enter into competition with their employer after their employment is over.
For example, a pediatrician subject to a non-compete agreement who subsequently quits his job or is terminated for whatever reason could be restricted from practicing pediatric medicine for the next 5 years within a 15-mile radius of his previous employer’s office. The reasonableness of these agreements depends on many factors, like the type of profession, the area in which the employer’s business is located and the specialized skill or expertise involved.
New York Assembly Bill A1278
If enacted, Assembly Bill A1278A would ban all post-employment non-compete agreements. Currently, the Bill has passed the State Assembly and is now being reviewed by Governor Hochul, who many think will sign the Bill into law.
The Bill prohibits employers from requiring non-compete agreements of any “covered individuals.” A covered individual is defined as “any 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.”
Civil actions can be brought against employers who violate the provisions of the law. These actions must be brought within two years of the later of (1) the signing of the non-compete; (2) the covered individual’s learning of the prohibited non-compete; (3) the termination of the employment relationship; or (4) the non-compete being enforced by the employer. Employers who violate the law would be liable for liquidated damages up to $10,000 as well as lost compensation, damages, reasonable attorney’s fees and costs.
Impact of the Ban on Non-Competes
If and when the bill is passed, all current employees and individuals seeking employment should be aware of their rights under the new law. Additionally, employers would need to comply with the newly changed law.
If you are subject to a non-compete agreement under the current law in New York or you have questions regarding how this change in law may affect you as an employee or employer, contact one of our trusted attorneys.