On December 22, 2023, New York Governor Kathy Hochul vetoed Senate Bill S3100A, which broadly prohibited employee non-compete agreements. As discussed in more detail HERE and HERE, the bill was passed by both legislative houses in June 2023.
The bill, which was similar to California’s Business and Professions Code Sec. 16600, was criticized by Governor Hochul and others for the following reasons:
- It did not contain a salary cap but rather broadly prohibited non-compete agreements at every level of employment, no matter the compensation level and/or bargaining power of the employee.
- There was no carve-out for non-compete agreements entered in connection with the sale of a business.
- There was no exception for non-compete agreements or provisions providing for the forfeiture of incentive compensation if an employee left to join a competitor, or non-competes providing for garden leave pay (i.e., when the employer agrees to pay the employee during the non-compete period) in lieu of competition.
In November 2023, Governor Hochul expressed concerns regarding the breadth of the bill, stating that she supports limiting the use of non-compete agreements for low and middle-income workers. On December 12, 2023, however, the bill was officially “delivered” to her without amendments addressing any of the issues mentioned above. Critically, during the 10-day consideration period, Governor Hochul and the legislature could not reach an agreement with respect to a salary cap which Governor Hochul had stated on several occasions was important to “strike a balance” between protecting lower to middle-income individuals and permitting businesses to retain highly-compensated employees.
The legislature will almost certainly reintroduce non-compete legislation again in 2024. And, in her veto memorandum, Governor Hochul wrote that she is “open to future legislation that achieves the right balance.”
If you have any questions relating to this eAlert or need help with non-compete agreements in general, please reach out to the NFC Attorney with whom you typically work or call us at 973.665.9100.
