New York Noncompete Ban Vetoed but Proposal Lives On

New York Governor Cathy Hochul recently vetoed a bill that would have enacted a sweeping ban on non-competition covenants amidst increasing opposition from business groups cautioning that the legislation would accelerate the retreat of businesses from the Empire State.

While Hochul vetoed the proposed bill, citing its “one-size-fits-all approach” and the “legitimate interests” of employers, the Governor indicated that she would be open to a compromise of banning non-competition covenants for low-wage workers, but allowing employees earning over $250,000 per year to enter into such agreements. Further, key lobbying groups supportive of the bill indicated that the “coalition behind this [proposal] has only gotten stronger, and expect this legislation will be back in an even more robust form.”

The Health Law Observer previously covered the proposed legislation and discussed the potential impact of the expansive bill, which would have affected “nearly all employer-employee and independent contractor relationships, without regard to the existence of a written agreement, the amount of compensation the individual receives, or whether the individual bargained at arm’s length in agreeing to the restrictive covenant.”

Hochul’s veto occurs as the business community awaits the Federal Trade Commission’s (“FTC”) Final Rule on its proposed ban of non-competition agreements.[1] Supporters of Hochul’s veto lauded her decision as a recognition that the legislation, if adopted, would have “driven more businesses and high earners out of the state” and caused employers “to move high-earning employees to other states where they wouldn’t be subject to the ban.” Nevertheless, the FTC’s decision looms large and could end up enacting many consequential aspects of the vetoed bill and on a nationwide basis.

The Health Law Observer will monitor any further developments in respect to New York or the forthcoming FTC Final Rule.

[1] Several resources documenting the Commission’s position can be found here.