The Future of Non-Competes in NY: Non-Competes Reconsidered in Senate Bill S4641A

Non-competes are contracts that prevent an employee from working for or starting a competing business.[1]  Typically, non-competes are enforceable for a specific period of time, ranging from six months to two years.[2]  These agreements can affect all employees, ranging from low-wage workers to CEOs.[3]  Non-competes are a controversial topic, with ongoing debate about their necessity.[4]  Advocates often argue they are necessary to protect trade secrets, while opponents argue they lower wages and limit job opportunities.[5]  In New York, non-competes remain enforceable; however, as lawmakers push for reform, their future remains uncertain.[6]

Non-competes are particularly problematic in the context of low-wage and middle-class workers, as these workers often have less access to proprietary information, reducing the need for non-competes in the first place.[7]  Further, low-wage and middle-class workers are particularly vulnerable to non-competes, as they often lack negotiation and bargaining power, and may not fully comprehend the consequences of what they are signing.[8]  Consider Michael Kenny, a single father struggling to make ends meet.[9]  He initially worked an overnight security job earning just $11 an hour, but when his childcare arrangements fell through, he had no choice but to quit.[10]  Fortunately, he soon secured a better-paying daytime security position at $15 an hour, only to find out unknowingly signed a two-year non-compete agreement.[11]  As a result, his new employer terminated him.[12]  Kenny’s financial situation deteriorated: he lost his car, declared bankruptcy, and has been unable to regain employment since.[13]  His experience displays the harsh reality faced by millions of low-wage workers bound by non-compete agreements.

In recent years, as scrutiny around non-compete agreements has heightened, several states have restricted non-compete agreements through bans or salary thresholds, and the FTC has even proposed a nationwide ban.[14]  Following Governor Kathy Hochul’s veto of a previous bill to ban non-competes in New York, a revised bill that would ban nearly all non-compete agreements across the state is now under reconsideration.[15]   

The first version of the bill, Bill A. 1278B, came to light on January 13, 2023, in the New York State Assembly.[16]  The bill was incredibly broad in scope, seeking to ban non-compete agreements for all employees in New York state, regardless of salary level or job position.[17] Importantly, there was no salary threshold that would exempt higher-income workers from the ban, a feature that many other states with successfully passed non-compete restrictions include.[18]  Hochul ultimately vetoed the bill, as she found the scope of the bill to be too broad.[19]  Hochul further emphasized that the “legislature’s one-size-fits-all approach” would not effectively handle the complexities of New York’s labor market.[20]  However, the possibility of enacting a less sweeping ban was left on the table when Hochul noted she would support a future ban as long it strikes a balance of protecting “middle-class and low-wage earners, while allowing New York’s businesses to retain highly compensated talent.”[21] 

The new and revised bill, introduced on February 10, 2025, aims to account for Hochul’s previous concerns by providing a salary threshold and carve-outs.[22]  The bill still bans non-competes for almost all workers, but leaves exceptions for highly compensated individuals[23] and health-related professionals.[24]  These changes align with Hochul’s feedback outlined in her veto message, recognizing the need for a ban to fit New York’s complex labor market by providing certain restrictions and an increasing trend to ban non-competes for healthcare professionals.[25]  Unlike the previous bill, it provides a carve-out for the sale of a business, a provision that Hochul supported in her veto message.[26]  Sale carve-outs are often viewed as necessary, as they allow for buyers in a transaction to have sellers sign non-competes, preventing sellers from using their deal proceeds to start a competitive venture.[27]  Notably, if passed, the ban would only apply to either modified or new non-competes,[28]  which protects employers from having their current contracts invalidated or altered.[29]  Given that a previous broader version of the bill already was passed by the New York legislature,[30] it is likely it will pass the state’s legislature again unless there are sudden changes in political support.   The passage and eventual enactment of this bill would be a major victory for millions of New Yorkers, ensuring greater fairness, mobility, and freedom in the job market.[31]

Overall, this revised bill is an incredibly positive and hopeful revitalization of a much-needed policy in New York.  For far too long, low-wage and middle-wage workers have been stifled by non-compete agreements that limit their mobility and career advancement.[32]  The bill strikes a pragmatic balance between protecting workers and addressing New York’s complex labor market by incorporating a salary threshold.  This comes at a crucial time, as the future of a federal ban remains uncertain under the new Trump administration.[33]  It is time for New York to join the dozens of other states[34] that restrict non-competes to protect workers for years to come.

[1] Non-Compete Agreements in New York State Frequently Asked Questions, N. Y. Sᴛᴀᴛᴇ Aᴛᴛ’ʏ Gᴇɴ. (Feb. 2022) https://ag.ny.gov/sites/default/files/non-competes.pdf [https://perma.cc/ZKD5-RWZG].

[2] Id; See also Adam Wright, Validity of Non-Compete Agreements, SɪxFɪғᴛʏ (Mar. 10, 2023) https://www.sixfifty.com/blog/validity-of-non-compete-agreements/ [https://perma.cc/695F-68AS]. 

[3] U.S. Gov’t Accountability Off., GAO-23-103785, Noncompete Agreements: Use Is Widespread to Protect Business’ Stated Interests, Restricts Job Mobility, and May Affect Wages 1 (May 2023).

[4] Evan P. Starr, J. J. Prescott & Norman D. Bishara, Noncompete Agreements in the US Labor Force, 64 J.L. & Eᴄᴏɴ. 53 (Feb. 2021).

[5] Id.

[6] Kenneth W. Taber, Rebecca C. Rizzo & Laura G. Killalea, New York Non-Compete Agreements Are Safe—for Now Non, Pɪʟʟsʙᴜʀʏ (Jan. 9, 2024) https://www.pillsburylaw.com/en/news-and-insights/ny-noncompete-agreements-safe-for-now.html [https://perma.cc/ACU3-ZA6L].

[7] Id.

[8]  Starr, Prescott & Bishara, supra note 4.

[9] Lauren Weber, The Noncompete Clause Gets a Closer Look, Wᴀʟʟ Sᴛ. J. (July 21, 2021) https://www.wsj.com/articles/the-noncompete-clause-gets-a-closer-look-11626872430 [https://perma.cc/SQD6-62QT].

[10] Id.

[11] Id.

[12] Id.

[13] Id.

[14] The FTC noncompete ban proposal was struck down by a Federal District Court this August in Ryan LLC v. FTC. The decision has been appealed. FTC Announces Rule Banning Noncompetes, Fᴇᴅ. Tʀᴀᴅᴇ Cᴏᴍᴍ’ɴ (Apr. 23, 2024) https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes [https://perma.cc/9ZYD-R8J9]; See also Ryan, LLC v. Fed. Trade Comm'n, No. 3:24-CV-00986-E, 2024 WL 3879954 (N.D. Tex. Aug. 20, 2024).

[15] Senate Bill S4641A; See also Clifford R. Atlas, Erik J. Winton & Cooper Binsky, NY’s Non-Compete Bill: What Employers Can Expect from a Newly Proposed Ban, Jᴀᴄᴋsᴏɴ Lᴇᴡɪs (Feb. 13, 2025) https://www.jacksonlewis.com/insights/nys-non-compete-bill-what-employers-can-expect-newly-proposed-ban [https://perma.cc/D3SU-3ZF5].

[16] Id.

[17] Id.

[18] Employment and Labor Insight: 2024 Salary Thresholds and Notice Requirements for Non-Competition and Non-Solicitation Provisions in Employment Agreements, Gᴜɴᴅᴇʀsᴏɴ Dᴇᴛᴛᴍᴇʀ (Feb. 15, 2024), https://www.gunder.com/en/news-insights/insights/employment-and-labor-insight-2024-salary-thresholds-and-notice-requirements-for-non-competition-and-non-solicitation-provisions-in-employment-agreements.

[19]  Veto Message on No. 133, S. 5141 (Dec. 22, 2024), https://www.crowell.com/a/web/czSsRVAdepa5GuFvEoV1vu/veto_133.pdf.

[20]  Id.

[21] Taber, Rizzo & Killalea, supra note 6.

[22] Atlas, Winton & Binsky, supra note 15.

[23] Highly compensated individuals are defined in the bill as any individual who is compensated annually $500,000 or more. Atlas, Winton & Binsky, supra note 15.

[24]  Id.

[25] The rationale behind an increasing number of states in banning non-competes in healthcare fields, is that a provider’s inability to practice medicine could limit patient care. Veto Message on No. 133, supra note 19.

[26]  Atlas, Winton & Binsky, supra note 15.

[27] Benjamin Ferrucci, Brendan J. Lowd, Nikki M. Rivers, Zachary H. Liebnick, What the FTC’s New Rule on Non-Competes Means for M&A and Private Equity Transactions, Mɪɴᴛᴢ (May 23, 2024) https://www.mintz.com/insights-center/viewpoints/2226/2024-05-23-what-ftcs-new-rule-non-competes-means-ma-andprivate#:~:text=In%20addition%20to%20non%2Dcompetes,connection%20with%20their%20continued%20employment [https://perma.cc/WP8R-LPGE].

[28]  Id.

[29]  Id.

[30] Atlas, Winton & Binsky, supra note 15.

[31] Sean M. Ryan, Commentary: Noncompete agreements are bad for workers, bad for consumers, and bad for the economy, Aʟʙᴀɴʏ Tɪᴍᴇs U. (May 16, 2023) https://www.timesunion.com/opinion/article/commentary-noncompete-agreements-bad-workers-18100145.php [https://perma.cc/KZS8-387M].

[32]  Id.

[33] Will New York State Lawmakers Ban Non-Competes in 2025? Here’s What Employers Need to Know About a Brewing State Law Trend, Fɪsʜᴇʀ Pʜɪʟʟɪᴘs (Dec. 12, 2024) https://www.fisherphillips.com/en/news-insights/will-new-york-state-lawmakers-ban-non-competes.html [https://perma.cc/96Q4-9SBL].

[34] Employment and Labor Insight: 2024 Salary Thresholds and Notice Requirements for Non-Competition and Non-Solicitation Provisions in Employment Agreements, supra note 18.