Prohibits non-compete agreements and certain restrictive covenants

◆ The sponsor's argument

Why the sponsor says this is needed

As their name implies, non-competes are intended to limit competition, and employers and workers do not have equal negotiating power when entering into such agreements. Workers often sign these agreements as part of a boilerplate onboarding packet along with their employment contract and HR paperwork. Non-compete agreements have a negative effect on the labor market and economy of New York State. They prevent workers from seeking employment at entities that may be a better fit, or from starting their own businesses, and they enable employers to provide less competitive benefits and wages because their workforce cannot seek employment elsewhere. Even in instances where non-compete agreements are unenforceable, their inclusion in or addition to an employment contract can have a chilling effect. Employees do not always have the time or money to go to court to litigate the enforceability of such agreements, and if they receive a cease and desist letter from an employer, will operate under the assump- tion that the legal reasoning in the letter is sound. Across the United States, governments are recognizing that non-compete agreements are bad for workers and bad for the economy. Many states have banned non-competes for all or some workers. California, North Dakota, Oklahoma, and Minnesota have full bans. Washington, Oregon, Maine, New Hampshire, Colorado, Virginia, Illinois, and Rhode Island protect work- ers below a certain income threshold from being bound by non-competes. This bill would take a similar approach, incorporating a high income threshold reflective of the variety of income levels across the many industries here in New York State. This threshold is tailored to capture executives and upper-management; a class of workers that employers may have a legitimate interest in restricting. This bill also takes care to carve healthcare workers out of the thres- hold-all healthcare workers, regardless of income, would be subject to the protections of the bill. Many states (including Pennsylvania, Tennessee, and Kentucky) have recognized that holding healthcare workers to non-compete agreements disrupts the continuity of care and impacts everyone in the state. The Federal Trade Commission (FTC) under President Biden introduced a regulation to ban non-competes nationwide. FTC officials claimed that this ban would lead to new business formation growing by 2.7% per year, and a multi-billion dollar reduction in healthcare costs. This regu- lation is currently being reviewed by federal courts, and as such, New York should step in and provide clarity to employees and employers alike.

This is the sponsor's own case for the bill, quoted from their memorandum. It is not Agora's description of what the bill does.