New York Governor Kathy Hochul is contemplating signing a bill passed in June that could make the state the sixth in the nation to enact a comprehensive ban on non-compete clauses.
This move follows a growing trend across the United States to restrict or eliminate these clauses, which prevent employees from working for competitors after leaving a job.
Push for Non-Compete Clause Bans
The states of California, Colorado, Oklahoma, North Dakota, and Minnesota have already implemented complete bans on non-compete clauses. California, boasting the largest economy in the nation, has prohibited such clauses since 1872, with recent legislation in September strengthening the ban to apply to contracts signed outside the state.
In 2022, Colorado banned non-compete clauses but included a carve-out for contracts involving “highly compensated workers,” defined as those earning more than $112,500 in 2023.
Massachusetts also passed legislation in 2018 to restrict non-compete clauses, entirely banning them for specific professions such as doctors, nurses, psychologists, social workers, broadcast industry workers, and lawyers.
New York’s proposed ban, Senate Bill S3100, echoes California’s approach, rendering all existing non-compete clauses void and providing employees with grounds to sue companies attempting to enforce them.
However, the Business Council of New York opposed the legislation, arguing that non-compete clauses are essential for employers to protect their legitimate business interests.
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New York Governor Seeks Compromise
Despite the bill’s passage, Governor Hochul has expressed reservations and called for compromise with business groups. She suggested an approach similar to Colorado’s, allowing non-compete clauses for workers earning more than $250,000 annually.
Hochul highlighted her concern for the competitiveness of New York firms nationally, particularly in comparison to those from other states.
The potential revision of the bill to include income limits would require approval from the legislature, potentially extending the process into January or February. Consequently, any changes would likely not take effect until 2025.
Meanwhile, on a federal level, the Federal Trade Commission (FTC) proposed a rule change in January to ban all non-compete clauses nationwide. FTC Chair Lina Khan emphasized that ending such practices would promote dynamism, innovation, and healthy competition in the American economy.
According to the commission, this move would save workers between $250 billion and $296 billion annually. The proposed federal rule change remains significant in the ongoing national conversation surrounding non-compete clauses.
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