New York Expected to Prohibit Non-compete Agreements
Our Employer clients who have New York employees or independent contractors need to be aware that New York has enacted a new Bill that will render unenforceable non-compete agreements entered into after the effective date of the Act which is 30 days following signature by the Governor. Her signature is expected although some reports suggest that she will require changes to the present Bill. Below are the essentials of the Bill.
The Bill applies to all Employers and "covered individuals." The definition of "covered individuals" includes every person who is in a position of economic dependence and obligated to perform duties, or who performs work for another person. As noted above, this includes independent contractors.
The bill applies to "non-compete" agreements but not agreements that merely prohibit solicitation of an Employer's customers. "Non-compete agreement" is defined as any agreement, or clause contained in any agreement, between an Employer and a covered individual that, following the end of employment prohibits or restricts a covered individual "from obtaining employment." The Bill also prohibits any Employer or its agent or the officer or agent of any corporation, partnership, limited liability company, or other entity from seeking, requiring, demanding or accepting a non-compete agreement from any covered individual.
The Bill's restrictions apply only to a period after employment ends. Accordingly, non-competes would appear to be legal during any period of employment even if the employee has been relieved of employment duties. The Bill does not affect agreements that merely prohibit disclosure of trade secrets or confidential and proprietary client information. As noted above, the bill does not affect agreements that prohibit an employee from soliciting those of an Employer's customers the employee learned of while working for the Employer. Customers of the Employer which the employee knew or had a relationship with prior to employment would, however, be fair game. The Bill is silent as to restrictions on an employee soliciting other employees or the vendors or suppliers of an Employer. Finally, the Bill does not prohibit non-competes entered into in the context of the sale of a business.
Violations of the Act subject Employers to suit (within a two-year statute of limitation measured, at the latest, from the date an Employer seeks to enforce an unlawful agreement) in which a court may award "all appropriate relief," including injunctive relief, liquidated damages of up to $10,000, "lost compensation, damages, reasonable attorneys' fees and costs."