Restrictive covenants are popular inclusions in modern employment contracts. Companies create restrictions on what economic activities a worker can engage in both while employed and after they leave their job. These restrictions, while frustrating for the worker, help protect the company from unfair competition.
Noncompete agreements are one of the most common kinds of restrictive covenants. They prohibit an employee from leaving their job and either going to work for a direct competitor or starting a competing company. Noncompete agreements have recently come under a lot of scrutiny both at the federal level and in New York state. Workers who previously signed contracts including noncompete agreements and those searching for a new job need to know if such agreements might limit their options.
The governor recently vetoed a non-compete ban
The New York state legislature did pass a bill that would ban non-compete agreements for New York employees. However, the bill as written will not become law unless the legislature overrides the governor’s veto. New York Governor Kathy Hochul vetoed a bill the week before Christmas that would have completely banned noncompete agreement enforcement in New York. She noted that she had tried to work with lawmakers to enact a law that offered protection to both sides. She referred to the ban as a “one-size-fits-all approach” that could harm New York companies.
There is a possibility that New York lawmakers may revisit the issue by either overriding the veto or passing a new, more nuanced bill in the future. There have also been discussions about a federal ban. For the time being, noncompete agreements remain theoretically enforceable in New York. Companies can take workers to court if they believe their employment or new company after leaving a position violates an existing noncompete agreement.
The terms of an agreement and new employment arrangements or business started by a former employee strongly influence whether the courts would uphold a non-compete agreement if a business initiates legal action against a former employee. Understanding New York’s current policy on non-compete agreements and other employment matters can help those who are negotiating new contracts or considering new economic opportunities.