The Rise of Non-Compete Agreements

Non-compete agreements also known as covenants not to compete (CNC), have been a staple in many employment contracts, especially in industries where proprietary information and trade secrets are at the forefront. These agreements are designed to prevent employees from working for competitors or starting a competing business for a specified period after leaving their current employer. While the intention behind such agreements is to protect businesses, they have often been criticized for stifling competition, hindering innovation, and unfairly limiting workers’ rights to seek better employment opportunities.

The Controversy Surrounding Non-Competes

The debate around non-compete agreements is multifaceted. Proponents argue that they are essential for businesses to protect their intellectual property, client lists, and trade secrets. Without such agreements, they believe companies would be hesitant to invest in research and development or employee training, fearing that employees might leave and take valuable information with them. On the other hand, critics contend that non-competes can be overly restrictive, preventing workers from pursuing better job opportunities and potentially leading to wage suppression. There’s also a concern that these agreements can be used to intimidate employees, even in industries where trade secrets are not a primary concern.

New York’s Progressive Stance

New York’s move towards potentially banning non-compete agreements is in line with a growing trend across the U.S. to prioritize workers’ rights. By joining states like California, Minnesota, and North Dakota, New York is signaling a shift in the balance of power from employers to employees. Such a move could make the state more attractive to top talent, who might otherwise be deterred by restrictive employment clauses. Furthermore, it could spur innovation, as employees would be free to start their ventures without the fear of legal repercussions.

Implications for Businesses

While the potential ban might be celebrated by workers, businesses will need to find new ways to protect their interests. This could lead to an increased emphasis on confidentiality agreements and more rigorous protection of trade secrets. Companies might also invest more in employee retention strategies, recognizing that keeping talent happy and engaged is the best way to prevent them from leaving for competitors. It’s also possible that we’ll see a rise in litigation as businesses test the boundaries of what’s permissible under the new regulations.

The Future of Employment Contracts

As states reconsider the legality and ethics of non-compete agreements, it’s likely that employment contracts across the country will undergo significant changes. The potential ban in New York might set a precedent for other states to follow suit. This evolving landscape will require both employers and employees to stay informed and adapt to the changing norms. It’s a reminder that in the dynamic world of employment law, flexibility and adaptability are key.

New York on the Verge of Prohibiting Employer Non-Compete Agreements” by Ty Hyderally

Hi, this is Ty Hyderally. I’m a plaintiff’s lawyer. We concentrate in employment law in New Jersey and New York. So, very exciting news coming out of New York with regard to non-compete agreements. Previously, the Senate passed a bill which would ban non-compete agreements in New York. Recently, in June of 2023, the assembly passed a similar bill which now goes to the governor’s desk for signature. And if Kathy Hochul signs this bill, New York will join other states such as California, Minnesota, and North Dakota which have already banned non-competes in those states.

It’s a broad ban on any agreement that in any way affects your ability to get employment after the termination of employment. So, the bill is prospective; it kicks in 30 days after the date the governor signs the bill if she signs the bill. But it covers not just employees, it covers independent contractors as well. So, if your employer comes up to you after the bill is in effect and demands that you sign a non-compete, you can lawfully refuse to do so. And if they insist, there are penalties. You can have a court action which gets you liquidated damages, lost wages, attorney’s fees, and costs that are reasonable, etc. And those are significant remedies that you can pursue in the courts if there is a violation.

It’s illegal for an employer to force an employee to sign a non-compete or threaten them if they don’t sign the non-compete with the loss of their employment. So, it’s a great bill if it’s passed that would get New York along with these other states and join the movement nationally to ban non-competes. This is Ty Hyderally, be safe and be well.