Prohibits non-compete agreements and certain restrictive covenants which unreasonably and unfairly bar or inhibit post-employment competition and protects certain workers from inappropriate and unnecessary restrictions on future employment.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A7864A
SPONSOR: Dinowitz TITLE OF BILL: An act to amend the labor law, in relation to prohib-
iting non-compete agreements and certain restrictive covenants
PURPOSE OR GENERAL IDEA OF BILL:
The bill would clarify and update New York labor law regarding the
permissible use of non-compete agreements in employment contracts.
SUMMARY OF SPECIFIC PROVISIONS:
Section 1, which adds a new section 191-d to the labor law, is divided
as follows:
Subsection 1: Defines "non-compete agreement" and "covered-employee."
Subsection 2: Provides that no employer or its agent, or the officer or
agent of any corporation, partnership, or limited liability company,
shall seek, require, demand or accept a non-compete agreement from a
covered employee.
Subsection 3: Outlines standards and requirements for non-compete agree-
ments with regard to employees or potential employees who are subject to
such agreements.
Subsection 4: Provides that if an employee subject to a non-compete
agreement is discharged without cause, the non-compete agreement is no
longer enforceable as to that employee.
Subsection 5: Provides that an employee, including a covered employee,
may bring a civil action in a court of competent jurisdiction against
any employer or persons alleged to have violated this section.
The employee shall bring such action within two years of the later of:
(i) when the prohibited non-compete agreement was signed; (ii) when the
employee learns of the prohibited non-compete agreement; (iii) when the
employment relationship is terminated; or (iv) when the employer takes
any steps to enforce the non-compete agreement.
The court shall have jurisdiction to void a non-compete agreement and to
order all appropriate relief.
Liquidated damages shall be calculated as an amount not more than ten
thousand dollars. The court shall award liquidated damages to every
affected employee in addition to other permitted remedies.
The court shall also award the consideration payment required under this
section if the employer did not provide such payment when due.
Subsection 6: Provides that the provisions of Section 1 do not apply to
employees covered under section 202-k of the labor law.
Section 2 contains a severability clause.
Section 3 sets the effective date (180 days after it shall have become a
law).
JUSTIFICATION:
The purpose of this bill is to promote economic growth by prohibiting
non-compete agreements and restrictive covenants that unreasonably and
unfairly bar or inhibit post-employment competition, and to protect
workers from inappropriate and unnecessary restrictions on future
employment. The bill will also help to ensure that businesses can hire
the best worker for the job.
Non-compete agreements present particular challenges for low-wage and
rank-and-file workers, who are increasingly subject to these
restrictions. Such workers, and/or their potential employers, may be
deterred by non-compete agreements from seeking new employment, but may
never have the opportunity to meaningfully negotiate such agreements and
may lack the means to challenge a non-compete agreement in court.
A March 2016 report published by the U.S. Treasury Department found that
non-compete agreements cause various harms to "worker welfare, job
mobility, business dynamics, and economic growth more generally." A May
2016 report published by the Obama White House concluded that non-com-
pete agreements also depress wages and inhibit innovation.
PRIOR LEGISLATIVE HISTORY:
None.
FISCAL IMPLICATIONS:
None to the State.
EFFECTIVE DATE:
180 days after it shall have become
