Employers that use certain noncompete agreements in New York state can continue to do so—for now. Gov. Kathy Hochul recently vetoed a bill that would have banned all noncompetes, but more proposals are expected.
As a result, “noncompetes are enforceable so long as they are reasonable in scope and they protect an employer’s legitimate interests,” said Shawn Clark, an attorney with Littler in New York City.
Similar noncompete bans exist in California, Minnesota, North Dakota and Oklahoma.
A noncompete clause prevents a worker from obtaining employment with a competitor, or starting their own competing business, for a certain amount of time after they leave an employer. Some noncompete clauses are limited to a certain geographic region.
Many employers use noncompete agreements to reduce turnover and prevent former employees from revealing trade secrets to competitors. Under the vetoed legislation, companies would still have been able to prohibit workers from disclosing trade secrets or proprietary client information, even without a noncompete.
If it had been approved, the legislation would have allowed employees to sue employers for imposing a noncompete agreement, and courts could levy damages up to $10,000. It would have applied to employees and independent contractors, regardless of their income level.
The governor vetoed the bill because she preferred to limit the ban to only apply to low-wage workers, Clark said. Some companies voluntarily use noncompete agreements with...
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