With the passage of a measure that would outlaw employee noncompete agreements, state lawmakers in New York took a step last week toward making a frequent but contentious contract condition a thing of the past.
The proposal would signal a significant labor triumph in New York by removing restrictive contracts required for all employees in an estimated 23% of employers statewide.
Republicans opposed the legislation, describing it as excessively broad yet well-intentioned.
The provisions often prohibit workers from launching a competitive firm or working for a competing employer within a specific geographic region once their employment expires.
If Governor Hochul signs the measure into law, it may have an impact throughout the United States.
A nationwide labor earthquake, according to employment attorneys who were pouring through the near-blanket non-compete ban’s phrasing.
“It’s a big deal,” said Mark Goldstein, a management-side employment attorney in Reed Smith LLP’s New York office and a specialist in non-compete agreements.
Eliminating them is a “fairly seismic change,” even in a state like New York, much less the entire nation.
He projected that other states or localities would use this to propose legislation that completely outlaws non-compete agreements.
According to the Federal Trade Commission, noncompete agreements restrict the employment of almost 30 million Americans.
Since the 19th century, the measure has been prohibited in California. But the most significant state in the country was always an exception.
The ground is now shifting swiftly. Although it is unclear if a national agency order banning noncompetes could withstand legal review, the FTC presented a proposed regulation in January.
Additionally, Minnesota outlawed noncompete agreements last spring, joining North Dakota, California, and Oklahoma in a tiny club. Many states have put restrictions on noncompete clauses for low-wage workers.
But the nation’s financial center is located in New York, which based its prohibition on the proposed FTC regulation.
A statute in New York combined with a restriction in California would result in two states, or nearly a quarter of the country, having similar laws.