Highlights

• The New York State Assembly recently passed Bill A01278, which would amend the New York Labor Code and prohibit covenants not to compete in employment agreements, with some notable exceptions.
• The legislation also gives covered individuals the right to bring civil action against employers who violate its tenets.
• The law would take effect 30 days after it is signed by Gov. Kathy Hochul, though it is unclear she will do so.

The New York State Assembly on June 20, 2023, passed Bill A01278, amending the New York Labor Code and prohibiting covenants not to compete, with certain notable exceptions, while also giving covered individuals the right to bring a civil action for violations of the law. Bill A01278 awaits the signature of Gov. Kathy Hochul and would become effective 30 days after it is signed.

Bill A01278 follows a trend of other states taking similar steps to curtail the usage of non-compete agreements. Illinois and Colorado recently passed legislation significantly restricting the use of non-compete agreements, and Minnesota this year passed a ban on most non-compete agreements. Additionally, the Federal Trade Commission (FTC) in January announced a proposed rule that would supersede all contrary state laws and essentially create a nationwide ban on non-compete agreements in employment contracts.

What Does Bill A01278 Cover?

Under the bill, employers may not require or accept a covenant not to compete from a covered individual.¹ The bill broadly defines a...

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