We recently reported on New York Bill No. S03100, which, if enacted, would broadly prohibit non-competition agreements in New York. On the same day, June 7, 2023, the New York Senate also passed Bill No. S6748  (the “Bill”), which would similarly prohibit non-competes. The Bill aims to prevent monopolies, monopsonies, and restraints on trade and classifies non-competes as unfair, anti-competitive business practices. Id. at § 8(2).

As in Bill No. S03100, the Bill would broadly ban non-compete agreements in New York and, notably, tracks verbatim the language used recently by the Federal Trade Commission in its proposed rule prohibiting most non-competes:

It is an unfair method of competition for an employer to enter into or attempt to enter into a non-compete clause with a worker; maintain with a worker a non-compete clause; or represent to a worker that the worker is subject to a non-compete clause where the employer has no good faith basis to believe that the worker is subject to an enforceable non-compete clause.

Id. and Bill No. S6748, §8(2).

The “good faith basis” phrase in §8(2) of the Bill could seemingly conflict with the Bill’s initial total ban, as it implies that there might be circumstances where an employer could have a “good faith belief” as to the existence of an enforceable non-compete clause, despite the clear prohibition. While the N.Y. Senate doesn’t explain this apparent contradiction, the FTC’s Notice of Proposed Rulemaking (while not binding on the interpretation of a NY law) dispels that implication, explaining that the language (which the Bill copied) aims to protect workers from employer exploitation of workers’ lack of knowledge regarding state law enforcement of non-compete clauses by prohibiting employers from asserting that workers are subject to such clauses. The FTC further explains that the “good faith basis” addition seeks to align the restriction of employer speech with the First Amendment, meeting legal standards set by U.S. Supreme Court rulings in cases concerning false commercial messaging.

The Bill also would prohibit, like the FTC proposed Rule, contractual provisions that function as de facto non-competes, such as a non-disclosure provision “written so broadly that it effectively precludes the worker from working in the same field after the conclusion of the worker’s employment with the employer,” or terms that penalize departing employees by requiring them to pay back “training” fees, when the fees are not reasonably related to the actual cost of the training. S6748 at § 8(1).

Notably, if passed, the impact of this Bill would be retroactive and any existing non-compete agreements in New York would become invalid 180 days after the law’s enactment date. Employers would be required to rescind any such agreements and provide notice to current or former workers subject to the agreements. Id. at § 8(3). Like Bill No. S03100, to become a law, the Bill must make it through the New York Assembly and be signed into law by Governor Hochul. We will continue to monitor the status of both bills, either of which would lead to significant changes in New York’s restrictive covenant landscape.

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Photo of Joseph O’Keefe Joseph O’Keefe

Joseph C. O’Keefe is a partner in the Labor & Employment Law Department and Co-Head of the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Joe is an experienced trial lawyer who, for more than 30 years, has litigated employment disputes of all…

Joseph C. O’Keefe is a partner in the Labor & Employment Law Department and Co-Head of the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Joe is an experienced trial lawyer who, for more than 30 years, has litigated employment disputes of all types on behalf of employers, before federal and state courts, arbitral tribunals (e.g. FINRA and AAA), and state and federal administrative agencies throughout the U.S. Joe has litigated employment-related lawsuits alleging breach of non-compete agreements, theft of trade secrets, discrimination, sexual harassment, whistleblowing, wage and hour violations, Title IX violations, breach of contract, defamation, fraud and other business related torts. Joe’s practice includes representing clients in complex class and collective litigation, including alleged violation of state and federal pay equity laws, violations of wage and hour laws and discrimination claims. Joe’s experience includes appellate work in both federal and state courts.

In addition to his extensive litigation practice, Joe regularly advises employers, writes and speaks on a wide range of employment related issues. He counsels clients concerning pay equity, use of Artificial Intelligence in the workplace, management of personnel problems, ADA/FMLA compliance, reductions in force, investigation of employee complaints, state and federal leave laws, wage and hour issues, employment policies and contracts.

Joe represents employers in a variety of industries including financial services, higher education (colleges and universities), pharmaceuticals/medical devices, health care, technology, communications, fashion, consumer products, publishing, media and real estate. He frequently writes articles concerning developments in the law and speaks at seminars concerning legal developments in the labor and employment law field.

Photo of Alexandra Oxyer Alexandra Oxyer

Alexandra “Alex” S. Oxyer is an associate in the Labor & Employment Law Department.

Alex concentrates her practice in complex employment litigation and employment law counseling, including advising clients on issues related to hiring and firing, workplace investigations, employment policies, and wage and…

Alexandra “Alex” S. Oxyer is an associate in the Labor & Employment Law Department.

Alex concentrates her practice in complex employment litigation and employment law counseling, including advising clients on issues related to hiring and firing, workplace investigations, employment policies, and wage and hour compliance. She regularly defends companies in all aspects of employment litigation, including claims of discrimination, harassment and retaliation, and breach of restrictive covenants (e.g., noncompetition and nonsolicitation). She has handled such cases before state and federal courts throughout the country, as well as before the U.S. Equal Employment Opportunity Commission, the Illinois Department of Human Rights, the Indiana Civil Rights Commission, the American Arbitration Association, and the Department of Labor.

Prior to joining Proskauer, Alex was a cum laude graduate from Indiana University Maurer School of Law. She previously practiced at a national management-side employment law firm, and in addition to her experience in private practice, Alex also worked as in-house counsel for a large public university. As in-house counsel, Alex investigated, managed, and resolved a wide range of disputes in the student affairs and employment areas, including single and multi-plaintiff discrimination, harassment, retaliation, and wage & hour issues.