If signed by Governor Hochul, the latest legislation will ban noncompete covenants between employers and employees, including any agreement or clause that prohibits or restricts the individual from obtaining employment after termination. This will go into effect thirty days after it is signed by the Governor and will apply to contracts entered into or modified after the effective date, meaning contracts signed before the effective date will not be affected.

Who is covered by the bill:

A broad scope of employers and “covered individuals,” including all employees and independent contractors, must abide by this new legislation. A “covered individual” is defined as those who work or perform services for another in a position of economic dependence. In other words, contracts between any worker and their employer are subject to this legislation. There are a few exceptions to the noncompete ban, including fixed term contracts, agreements concerning confidentiality, prohibitions on soliciting the employer‘s clients, provisions for the sale of a business, and poaching of other employees or contractors by a former employee.

Repercussions for violations:

Violations of this bill will result in voiding of the contract, as well as the potential for the worker to bring a civil action against the employer. Relief for affected contractors who bring an action may include injunctive relief, liquidated damages, and attorney‘s fees. Workers have a period of two years from when the agreement is signed, the individual learns of the noncompete clause, the employment is ended, or the employer attempts to enforce the noncompete clause, whichever is the latest, to bring an action.

What employers should do:

Employers should look into any current or future noncompete covenants that they had planned to use in agreements and ensure that they comply with the new legislation. Any such clauses in contracts that were signed before the effective date may remain, but must be removed if there is a subsequent modification of the contract.