Restrictive covenants generally, and covenants not to compete in particular, have long been difficult to enforce in New York, under the law as stated in the Seminal 1999 Court of Appeals BDO Seidman case. However, enough discretion remained in the law regarding the reasonableness of the covenant at issue that enforcement still occurs with some regularity. The New York Legislature has responded by passing a sweeping bill effectively banning all non-compete agreements. Governor Hochul has expressed support for barring non-competes in the past and could sign it into law any day. On the federal level, the General Counsel of the National Labor Relations Board has recently opined that non-competes are already illegal under the National Labor Relations Act, and that opinion will certainly be litigated. Independently, the Federal Trade Commission is reportedly considering a broad, fully retroactive non-compete ban.
Although the proposed NYS law is not retroactive, it will certainly make it less likely older laws will be enforced. Remedies against employers attempting to impose or enforce non-competes under the new law include injunctions, attorneys’ fees, liquidated damages up to $10,000, and lost compensation, if any. Claims may be brought within two (2) years of signing a non-compete, the end of employment, or the start of attempted enforcement of it.
While all employee non-competes would be voided by the law, employers could still utilize non-solicitation of customer agreements, though the litigation of who solicited who is often difficult for employers. Employers will also be able to retain clauses protecting trade secret and confidential client information to the extent they would not “otherwise restrict competition in violation” of the law.
If you have any questions regarding this or any other Labor & Employment law topic, please call Paul F. Keneally at (585) 258-2882 or email pkeneally@underbergkessler.com.