A controversial practice by many employers is to force their new employees to sign non-compete agreements. These agreements can unfairly restrict one’s future employment options when it’s time to switch jobs. This may change in New York with the passing of a ban on non-compete agreements by the General Assembly. If signed by the governor, Bill A01278 would be an effective non-compete ban in NYC and throughout the state. At Ricotta and Marks, we are committed to helping New York City employees understand the terms and status of the new bill and protect their future employment rights under the law.
Terms of the Non-Compete Ban
Generally, the bill prohibits non-compete agreements and other restrictive covenants as it relates to employment. The bill also authorizes a harmed employee to file a lawsuit against any employer or persons alleged to have violated the provisions of the bill. There is a two-year statute of limitations on filing a lawsuit for violation of the statute. What this means is that after two years, an employee loses their right to file a lawsuit and seek damages under the statute. An employee can file a lawsuit within two years of the later of the following triggering events:
- When the prohibited non-compete agreement was signed;
- When the covered individual learns of the prohibited non-compete agreement;
- When the employment or contractual relationship is terminated; or
- When the employer takes any step to enforce the non-compete agreement.
The definitions contained in the bill are pretty straightforward. The new legislation defines a non-compete agreement as “any agreement, or clause contained in any agreement, between an employer and a covered individual that prohibits or restricts such covered individual from obtaining employment, after the conclusion of employment with the employer included as a party to the agreement.” This means that an employer can’t force employees to sign an agreement that restricts the employee’s future employment.
The bill, however, lists exceptions to the broad prohibition of non-compete agreements. Specifically, an employer can still have an employee sign agreements relating to the “disclosure of trade secrets, disclosure of confidential and proprietary client information, or solicitation of clients of the employer that the individual learned about during employment.”
Another exception is that an employer can enter into an employment contract with an employee for a “fixed term of service.” This term isn’t defined within the bill itself, but it most likely refers to employment contracts for a fixed number of years or a fixed time period.
Status of the Non-Compete Ban in NYC
Currently, Bill A01278 is sitting on the New York State Governor’s desk being studied before the decision is made to sign the bill into law. However, it is likely that she will sign the bill into law, becoming the fifth state to completely ban non-compete agreements, behind California, North Dakota, Oklahoma, and Minnesota. Once the bill is signed into law, it will only affect non-compete contracts that are created or modified after the law takes effect. This means that the law is not retroactive and will not affect previously signed non-compete agreements.
The Bottom Line
Although the bill is going in the right direction in protecting employees’ rights, there are many unanswered questions and undefined terms within the bill’s language. These questions will ultimately have to be answered by the courts. At Ricotta and Marks, we strive to provide the most updated and important employment-related information for our clients and readers. Contact us if you have any questions or need help with navigating the non-compete ban in NYC. We’re only a phone call away.