New York Governor Vetoes Bill Banning Noncompete Agreements, Keeping Current Laws in Place

New York Governor Kathy Hochul recently vetoed a bill that would have entirely banned noncompete agreements in the state, a decision that maintains the enforceability of such agreements for now. This move offers a temporary reprieve for employers in New York who utilize noncompetes. Noncompete agreements, often part of employment contracts, restrict an employee from working with a competitor or starting a competing business for a specified period after leaving a job.

The legislative process began five months prior, with both houses of the New York State Legislature passing a bill outlawing noncompete agreements. Discussions about a possible compromise, including exemptions for "high earners," were considered. Hochul proposed a cut-off at $250,000, while legislative lawmakers suggested $300,000. Another proposal recommended using an area’s median income as a standard. Hochul also suggested "grandfathering" existing noncompetes, contrary to the legislature’s bill.

Post-veto, Hochul expressed her attempt at a reasonable compromise, balancing the protection of lower- and middle-income workers with the retention of businesses in New York. Labor groups argue that noncompetes harm workers and hinder economic growth, while business advocates claim they are vital for protecting investments and proprietary information.

The governor acknowledged the need to restrict noncompete agreements for middle-class and low-wage workers and remains open to future legislation that strikes a suitable balance. This development signals that further legislative efforts to challenge the validity of noncompetes may arise, prompting employers of all sizes to be prepared.

Employers are advised to review their employment agreements to ensure noncompetes and other restrictive covenants are appropriately crafted for each employee. They should also consider other protections not covered by the proposed New York legislation to safeguard their investments in employees, trade secrets, proprietary information, and against unfair competition.