On February 28, 2024, members of the New York City Council introduced Bill 140, legislation that would ban virtually all non-compete agreements between employers and workers in New York City. As we have previously described, New York Governor Kathy Hochul recently vetoed a bill that would have banned most non-compete agreements in New York State.
Bill 140 would prohibit employers from entering into any agreement with workers in New York City that “prevents, or effectively prevents, the worker from seeking or accepting work for a different employer, or from operating a business, after the worker no longer works for the employer.” Bill 140 would apply to employees, independent contractors, or any other person “who works, whether paid or unpaid, for an employer.” The bill would apply retroactively, requiring employers to rescind any preexisting non-compete agreements. In addition to no longer being able to enforce any non-compete agreement, employers who violate the bill would be subject to civil penalties of $500 per violation.
City Council members also introduced two alternative pieces of legislation, Bill 146 and Bill 375, in the event that Bill 140 does not pass. Bill 146 and Bill 375 would prohibit non-compete agreements for only certain subsets of New York City workers.
Bill 146 would prohibit non-compete agreements with low-wage employees, defined as a “clerical or other worker” under Section 190 of the New York Labor Law, which excludes manual workers, railroad workers, commissioned salespersons, and persons in a “bona fide executive, administrative or professional capacity” whose earnings exceed $1,300 per week. Bill 146 would also require employers to provide any other employee asked to sign a non-compete agreement with notice at the time of the employee’s hiring that “they may be subject to” a non-compete.
Finally, Bill 375 would bar employers from entering into non-compete agreements with freelance workers without providing for an agreed-upon sum to be paid to the worker for the duration of the non-compete period. Bill 375 defines “freelance worker” to include all independent contractors, other than sales representatives, lawyers, licensed medical professionals, or members of the Financial Industry Regulatory Authority.
These bills have been referred by the City Council to a sub-committee on Consumer and Worker Protection. In the interim, New York City employers should be mindful of increased interest by lawmakers in limiting employers’ use of non-compete agreements.