Joining an emerging trend of legislative and regulatory hostility towards non-compete agreements, on February 28, 2024, the New York City Council introduced three new bills proposing restrictions on non-compete agreements in New York City.  Int. No. 140 proposes an outright ban on non-compete agreements for all workers in New York City.  Int. No. 146 and Int. No. 375 focus on restricting non-compete agreements for low-wage employees and freelance workers (collectively the “NYC Bills”).

As previously reported, New York Governor Kathy Hochul recently vetoed a bill proposing a near-total ban on non-compete agreements in New York State.  The NYC Bills mark the first local laws in New York proposing restrictions on non-compete agreements since Governor Hochul’s veto.  It remains to be seen whether this local legislation will become law in New York City.

Bill Int. No. 140

Bill 140 proposes a broad ban on non-competes for New York City workers.  Bill 140 would bar employers from making non-compete agreements with any worker in New York City and cancel non-compete agreements entered before the law takes effect.  The ban would not be limited to non-compete agreements with employees.  “Worker” is broadly defined to include any “natural person who works, whether paid or unpaid, for an employer.  Such term includes an individual classified as an independent contractor.” Bill 140 further prohibits employers from representing to a worker that they are 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.

Under the proposed law, the NYC Office of Labor Standards would enforce the ban and employers found in violation may be subject to a civil penalty of $500 per violation.

If Bill 140 becomes law it will render superfluous Bills 146 and 375, discussed below, which offer alternatives to a total ban.

Bill Int. No. 146

As an alternative to a total ban, Bill 146 seeks to ban non-compete agreements for “low-wage employees,” defined as a “clerical or other worker” as defined in §190 of the New York Labor Law, which excludes manual workers, railroad workers, commissioned salespersons, and persons in a “bona fide executive, administrative or professional capacity” whose earnings exceed $1,300 (effective March 13) per week.

Notably, the proposed legislation includes a disclosure requirement for prospective non-low wage employees, requiring that employers disclose in writing that they may be subject to a non-compete agreement.  Employers are prohibited from requiring such employees to enter into a non-compete agreement unless this disclosure is made.

Bill Int. No. 375

Bill 375 would limit non-competes for freelance workers.  The Bill describes “freelance worker” as a person or a single-person organization hired or contracted to provide services for payment. Bill 375 excludes some types of workers from the meaning of “freelance worker,” such as: sales representatives as defined by labor law, lawyers, licensed medical professionals, and members of the Financial Industry Regulatory Authority.

This bill would ban an employer from entering a non-compete agreement with a freelance worker, unless the agreement also makes the employer pay a “reasonable” and “mutually agreed upon” amount to the freelance worker every two weeks or every month while the non-compete lasts.  The non-compete will be null and void if the employer does not pay.

Bill 375 provides for potential civil penalties of $500 per violation and a private right of action for aggrieved freelance workers to obtain a declaratory judgment voiding the non-compete, attorney’s fees and $1,000 in damages.  Additionally, the city can commence a civil action challenging a pattern of violations to obtain a $25,000 penalty.

We will continue to monitor and report on the progress of the NYC Bills.  If any of the Bills are passed and become law, they would take effect 120 days after passage.

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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.