NEW YORK’S NON-COMPETE AGREEMENT BANK IS (ALMOST) HERE

Key Questions Employers Should Consider Now Before The Ban Takes Effect: 

🔵 Question 1 – What will the law prohibit? 

This means that New York employers will likely be prohibited from entering into or seeing an agreement with an individual that restricts the individual's ability to obtain employment with a new employer after the conclusion of the original employment relationship. 

🔵 Question 2 – What will still be allowed under the law? 

The bill contains limited exceptions, expressly allowing agreements with covered individuals that… (1) establish a fixed term of service by the individual; (2) prohibit disclosure of trade secrets and/or other confidential information; or (3) prohibit the solicitation of an employer's clients to which the covered individual was introduced by virtue of the employment relationship, provided the agreement does not otherwise restrain competition. 

🔵 Question 3 – Will the law prohibit non-compete agreements executed before the law becomes effective? 

NO!

🔵 Question 4 – Will the law apply to independent contractors and other non-employers? 

YES! 

🔵 Question 5 – What are the potential enforcement mechanisms and penalties to employers?

The bill affords covered individuals a private right of action to sue for invalidation of a prohibited non-compete agreement. The statute of limitations runs for two years from the latter of… (1) the signature of the non-compete agreement; (2) the covered individual's first discovery of the non-compete agreement; (3) the termination of the business relationship with the covered individual; or (4) the employer's first effort to enforce the non-compete agreement. 

The bill also allows courts to void prohibited non-compete agreements and award "appropriate relief," including liquidated damages (capped at $10,000), lost compensation, and reasonable attorneys' fees and other costs. 

🔵 Question 6 – If a contract includes an unenforceable non-compete agreement, will the entire contract be void under the new law? 

VERY LIKELY NOT! 

🔵 Question 7 – What should employers do now to prepare for the new law? 

Change is coming to New York's non-compete rules in one form or another. Savvy employers should consider the following steps to prepare for the new non-compete agreement landscape: 

• Execute non-compete agreements now before the bill becomes law. 

• Consider the benefits of garden leave clauses under which employees may be required to provide notice of their resignation before being allowed to work for a competitor.

• Consider whether the value of an employee's non-compete promise is worth promising the employee a "fixed term of service," such that the employee will not be employed "at-will". 

• Execute appropriate non-disclosure and non-solicitation agreements in order to protect against the disclosure of trade secrets and other confidential information and the poaching of clients to which employees and service providers are introduced by virtue of the employment or independent contractor relationship. 

This document is designed for general information only. The information presented in this document should not be construed to be formal legal or tax advice nor the formation of a lawyer/client relationship. 

For more information on this and other topics, please contact Kevin via any of the channels listed below:

📧 kevin@kmckernan.com  | 📞 718-317-5007