New York Governor Hochul Signals Willingness to Sign Non-Compete Ban With Changes

December 6, 2023

As New York employers should be aware, bans on non-compete agreements were proposed this past year at both the Federal and State levels (previously discussed here, here, and here). First, in January 2023 the Federal Trade Commission (“FTC”) proposed a near total, nationwide ban on non-competes, with a final rule expected in the second quarter of 2024. Then, in June 2023, the New York legislature passed its own bill seeking to ban nearly all non-compete agreements, without even a traditional carve-out for non-competes negotiated in connection with asset sales. New York’s proposal, if it became law, would make New York arguably the most restrictive jurisdiction in the country as to non-competes. Industry observers have awaited Governor Hochul’s reaction ever since.

On November 30, 2023, in her first public comments on the legislation, Governor Hochul expressed a desire to see changes, including a wage threshold, before she would consider signing the bill. As she told the media, the bill must strike a better “balance between protecting low and middle-income workers” on the one hand, and “industries that are an important part of our economy here in New York” on the other.[1] The Governor indicated that this could be achieved by, for example, a salary threshold of $250,000 (over which the ban would not apply) and a sale-of-business exception.

While the legislative sponsor of the underlying bill, New York State Senator Sean Ryan, expressed his support for the asset sale exception, he expressed less enthusiasm for the wage threshold-at least at the $250,000 level, which he believes “could restrict every worker at a Manhattan tech company.”

From the statements issued to date from both the Executive and Legislative branches of the Empire State, we may see these changes implemented by chapter amendments before Governor Hochul signs the revised bill into law.

As for the FTC proposed ban, it is worth noting that, in a November 28, 2023 letter to Governor Hochul, the FTC highlighted its own proposal to ban non-compete at all wage levels, in perhaps a preview of what’s to come when the FTC delivers its final rule.

New York employers should continue to anticipate and prepare for additional restrictions on their use of non-competes as developments as the Federal and State levels unfold.

[1] As reported by Bloomberg (here) and Times Union (here).

For more information on this issue or other employment matters, please contact:

John Chun at +1 212 592 1546 or [email protected]
Carol M. Goodman at +1 212 592 1465 or [email protected]
Basil Sitaras at +1 212 592 1500 or [email protected]

© 2023 Herrick, Feinstein LLP. This alert is provided by Herrick, Feinstein LLP to keep its clients and other interested parties informed of current legal developments that may affect or otherwise be of interest to them. The information is not intended as legal advice or legal opinion and should not be construed as such.