New York's Proposed Non-Compete Agreement Bill

New York State Senator Sean Ryan recently introduced Senate Bill 4641 (the “Bill”) that proposes to ban noncompete agreements for most New York employees.

If passed, the Bill would prospectively prohibit employers from enforcing noncompetes, except for highly compensated individuals who make an average of $500,000 or more per year and in the context of the sale of a business.  The Bill would not apply retroactively, so if passed, existing noncompetes would remain enforceable consistent with New York common law.

The Bill follows Governor Hochul’s December 2023 veto of Senate Bill 3100-A, also sponsored by Senator Sean Ryan, that sought to broadly ban noncompetes for all employees regardless of income. As we reported in December 2023, Governor Hochul stated that she would not sign an outright noncompete ban, but instead preferred a “balance” with a compensation threshold and a carveout for noncompete entered into in connection with the sale of a business. The new Bill does just that.
Read the full article
New York State Proposes Bill to Ban Noncompetes Except for Highly Compensated Workers and in Sales of Businesses
Epstein Becker | Apr 2025

Read the text of the measure

Overview of Non-Compete Agreements

A non-compete agreement is a contract where an employee agrees not to enter into competition with an employer after the employment period is over. Non-Compete Agreements may restrict:

• Working for a competitor
• Starting a competing business
• Soliciting clients or employees

These agreements are typically used to protect trade secrets, confidential information, and business interests.

Over the past few years, non-compete agreements have come under increasing scrutiny at both the state and federal levels, with a focus on:

• Fairness: Critics argue non-compete agreements are overused, particularly with low-wage workers.
• Mobility and Wages: Studies link non-compete agreements to suppressed wages and reduced job mobility.
• Enforceability: More states are enacting regulations to restrict or ban non-compete agreements, especially for certain wage levels or professions.

Key Considerations for HR Professionals

1. Know When Non-Competes Are Appropriate
   • Typically used for executives, sales staff with key client relationships, or employees with access to confidential information.
   • Not suitable for low-wage or entry-level workers in most states.
2. Stay Informed on State Laws
   • Enforceability varies widely by state. Some states (like California, Oklahoma, and North Dakota) ban them outright, while others impose limits based on income thresholds, duration, or business justification.
   • Many states now require notice, consideration, or advance disclosure of non-competes before the start of employment.
3. Use Alternatives to Non-Competes
   • Non-solicitation agreements (preventing poaching of clients/employees)
   • Confidentiality or trade secret agreements
   • Garden leave clauses (paying employees during restricted periods)
4. Review and Update Agreements Regularly
   • Ensure agreements are narrowly tailored, reasonable in scope, and legally compliant.
   • Work with legal counsel to audit and revise agreements proactively.

SHRM Resources

Can an employer make noncompete and confidentiality agreements a condition of employment for current employees?
Legal Viewpoint: Next Steps for Noncompete Agreements
Sample: Noncompete and Nonsolicitation Provisions

Law Articles on Proposed NY Bill

Under the bill, a non-compete for a so-called highly compensated individual is permitted, provided that it does not extend longer than one year, such highly compensated individual is paid his or her salary during the enforcement period and meets all other requirements for determining enforceability under New York common law.  The bill also permits agreements that (i) establish a fixed term of services and/or exclusivity during employment; (ii) prohibit the disclosure of trade secrets; (iii) prohibit the disclosure of confidential and proprietary client information; and (iv) prohibit the solicitation of clients of the employer, provided that any “such agreement does not otherwise restrict competition in violation of this section.”  Importantly, these permitted agreements do not address employee non-solicitation provisions. 

The bill permits the inclusion and enforceability of non-competes in the sale of goodwill of a business or the sale or disposition of a majority of an ownership interest in a business by a partner of a partnership or a member of a limited liability company where such person or entity owns 15 percent or more interest in the business.  As drafted, the bill seems to impose the one-year duration and payment of salary requirement on the sale of business exception. 
Proposed NY Non-Compete Ban
Thompson Coburn | Mar 2025

Section 191-d(3) would create a private cause of action for any Covered Individual to “bring a civil action in a court of competent jurisdiction against any employer or persons alleged to have violated [Section 191-d].”

The bill provides for a shifting statute of limitations. A Covered Individual has two years from the later of the date: “(i) when the prohibited non-compete agreement was signed; (ii) when the covered individual learns of the prohibited non-compete agreement; (iii) when the employment or contractual relationship is terminated; or (iv) when the employer takes any step to enforce the non-compete agreement.”

As remedies, a court may void any such non-compete agreement and “order all appropriate relief, including enjoining the conduct of any person or employer; ordering payment of liquidated damages; and awarding lost compensation, compensatory damages, reasonable attorneys’ fees and costs” to the Covered Individual or Health Related Professional.
NY’s Non-Compete Bill: What Employers Can Expect from a Newly Proposed Ban
Jackson Lewis | Feb 2025

The bill would require employers to inform employees of their “protections and rights” under the non-compete ban by conspicuously posting a notice in easily accessible places customarily frequented by employees and applicants. Such notice would be developed and provided by the New York Department of Labor.
New York State Senate Introduces Bill that Would Ban Non-Compete Agreements
Morgan Lewis | Feb 2025

Related Reading
Not Fooling Around: Critical New York State Legislative Updates for Employers as April Begins
Seyfarth | Mar 2025

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