On the same day that the White House released its “State Call to Action on Non-Compete Agreements,” encouraging states to adopt best practice policies in the enforcement of non-compete agreements, New York State’s Attorney General announced that he plans to introduce legislation in 2017 to curb the use of these agreements. According to Attorney General Eric T. Schneiderman’s October 25 press release, the new bill promises to “curb the rampant misuse of non-compete agreements, which depress wages and limit economic mobility by banning workers from employment at a competitor for a mandated period after leaving a job.” Currently, New York does not have any statutes regarding the use of restrictive covenants, so agreements are only subject to judicial common law.

Schneiderman’s proposal comes on the heels of settlements by the Attorney General’s Office that effectively ban the use of non-compete agreements at a publishing company and fast food company. According to the press release, the New York bill, which would be “the most comprehensive proposal yet to protect workers,” imposes the following obligations:

  • The bill will prohibit employers from using non-compete agreements for low-wage workers, in particular, for those who earn less than the administrative and executive exemption salary thresholds.
  • The legislation would require employers to provide prospective employees with non-compete agreements before extending a job offer.
  • The bill would require employers to pay employees additional compensation if they sign non-compete agreements.
  • If passed, the law will restrict employers’ use of non-compete agreements that are broader than are necessary to protect the employer’s trade secrets or confidential information.
  • Schneiderman’s proposal limits the time duration for non-compete agreements.
  • The bill would create a private right of action with remedies that employees can pursue when they are subjected to unlawful non-compete agreements. In addition, the proposal includes a “first-of-its-kind provision granting employees the right to seek liquidated damages.”

Commenting on his proposal to restrict and impose conditions on the use of employment non-compete agreements, Schneiderman said, “[w]orkers should be able to get a new job and improve their lives without being afraid of being sued by their current or former employer.” According to Schneiderman, “My proposed bill will protect workers’ rights to seek new and better opportunities, particularly low-wage workers who have been locked into minimum wage jobs due to non-competes. It will also ensure that businesses can hire the best worker for the job.”

A draft of the legislation is not yet available. Ogletree Deakins will continue to monitor this development.