In a recent turn of events, Governor Kathy Hochul has vetoed Senate Bill S3100A, which passed both houses of the legislature in June 2023, and this proposed bill sought to ban all non-compete agreements in the State of New York. The decision has sparked debates and raised questions about the balance between protecting businesses and ensuring employee rights.
The proposed legislation aimed to restrict or outright ban non-compete agreements, which are contractual clauses that prohibit employees from working for a competing business for a specified period after leaving their current job. Proponents of the ban argued that such non-compete agreements limit employee mobility, stifle innovation, and create an uneven power dynamic between employers and employees.
In her veto message, Governor Hochul emphasized the need to strike a balance between protecting lower- and middle-income workers earning below $250,000, without driving businesses out of state. She acknowledged the concerns raised by both sides of the debate and expressed the importance of a nuanced approach to address the complexities involved. The Governor argued that a complete ban could have unintended consequences for businesses, especially small and medium-sized enterprises that rely on non-compete agreements to protect their investments in employee training and confidential information. She expressed concerns that such businesses have legitimate interests that cannot be met with the Legislation’s one-size-fits-all approach.
From a business perspective, it is undoubtedly certain that businesses will support the governor’s decision to veto at this time, as there is a legitimate need to retain talent and safeguard proprietary information. Non-compete agreements are often seen as essential in industries where trade secrets and client relationships play a crucial role. As such, a blanket ban on such agreements could hinder a company’s ability to innovate and compete in the market.
On the other hand, labor advocates and employee rights groups argue that non-compete agreements disproportionately affect low-wage workers and restrict their ability to seek better employment opportunities. Critics contend that these agreements contribute to wage suppression and limit job market competition, ultimately hindering economic growth.
So, now what? The bill will likely be reintroduced this calendar year, as the conversations continue amongst policymakers, businesses, and employee advocates to seek common ground. Suggestions have emerged, such as imposing reasonable time limits on non-compete agreements or requiring employers to provide compensation to employees during the restricted period.
Catina & Mara, PLLC will continue to monitor these ongoing discussions and developments as they relate to non-compete agreements, which affect our business clients and individual clients year over year.
Disclaimer: The information contained in this post is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls and communications. Contacting us, however, does not create an attorney-client relationship.