News Based on facts, either observed and verified directly by the reporter, or reported and verified from knowledgeable sources.
The New York State legislature has successfully passed a comprehensive bill aimed at banning noncompete agreements across the state. The legislation, Bill 1278, seeks to address concerns regarding the negative impact of noncompete clauses on employees, particularly those in lower-wage positions.
The bill passed in the Assembly on Tuesday following earlier approval on June 7 in the Senate.
It establishes three exceptions or carve-outs for specific types of restrictive covenants. These exceptions include agreements with fixed terms of service, agreements prohibiting the disclosure of trade secrets or confidential information, and agreements prohibiting the solicitation of clients and employees.
During discussions surrounding the bill, the issue of noncompete clauses in onboarding paperwork was raised, with the restaurant Chipotle Mexican Grill being mentioned as an example. A worker might, for example, be currently banned from working at a competing local Mexican restaurant offering higher pay, under the status quo.
(Chipotle has several local locations, including in Mount Kisco, Mohegan Lake, and White Plains).
Separately, an Examiner investigation in January revealed how doctors working at the local CareMount/Optum healthcare organization feel “trapped” by noncompete agreements they signed with the medical group, unable to leave to start their own nearby practices, and thus enhance care for patients. Doctors would be free to leave and start their own nearby practices if this bill becomes law.
But the impetus for New York lawmakers was primarily about addressing inequities faced by low-wage workers.
The bill is expected to face stiff challenges from private industry, and Gov. Kathy Hochul might feel pressure from business interests to veto the measure, or narrow its scope, a source told The Examiner.
“Business is going to come at her hard and be like, hey, we need help,” said one observer with insider insights, requesting anonymity to speak freely about the politics. “So we’ll see.”
Republicans voiced concerns about the state interfering with existing contracts, arguing for the importance of business certainty.
The bill stipulates that people can seek attorney’s fees and liquidated damages of $10,000. This provision aims to ensure that employees have the means to challenge noncompete agreements in court, with the law on their side.
That said, the law would essentially make existing contracts null and void. An employee under current contract could go work at a competitive business, or set up their own shop, without fear of any legitimate legal challenge by their employer.
While opponents argue that the bill may disrupt existing business practices and contracts, supporters contend that it would benefit employees by increasing their freedom to pursue better opportunities and also foster healthier competition among businesses.
There’s also an effort on the federal level to prohibit noncompetes. The Federal Trade Commission is reportedly planning to hold a vote in April of next year on a proposed ban.
The bill will now await Hochul’s decision on whether to sign it into law or seek amendments to address specific concerns. She has until Dec. 31.