BILL NUMBER: S734

SPONSOR: BIAGGI
 
TITLE OF BILL:

An act to amend the labor law, in relation to prohibiting non-compete
agreements

 
PURPOSE OR GENERAL IDEA OF BILL:

To limit the use of non-compete clauses and protect workers who lose
their jobs due to an emergency situation.

 
SUMMARY OF SPECIFIC PROVISIONS:

Section 1 amends the labor law by adding a new section 191-d to define
non-compete agreements and specify the conditions in which they are
enforceable.

Section 2 sets forth the effective date.

              

 
JUSTIFICATION:

Non-compete agreements are becoming increasingly common across all
industries. According to a 2019 estimate by the Economic Policy Insti-
tute, 44% of workplaces in New York State require at least some employ-
ees to sign non-compete agreements.(1) Non-competes agreements, which
are designed to keep employees from going to work for a competitor, used
to be required primarily for high paid Executives to prevent them from
sharing proprietary information. However, more and more low wage workers
are now subject to non-compete clauses. For example, until 2016, Jimmy
Johns required employees to sign non-compete agreements that prevented
them from working at a competitor or any store that earned 10% or more
of its revenue from sandwiches within a two mile radius of any Jimmy
John's location for two years after they left the company.

These agreements make it harder for workers to find new jobs and, by
extension, limit worker's ability to look for better pay and working
conditions. New Yorkers across industries have lost their jobs overnight
as businesses have had to close or face financial difficulties in the
wake of COVID-19. When NY PAUSE ends, there is no guarantee that every
business will reopen or be able to rehire their employees. New York
State must ensure that workers who are already facing significant
economic hardship are not limited in their employment opportunities.

Non-compete agreements are not currently governed by statute or regu-
lation in New York State. However, New York State courts have adopted
the common-law standards of reasonableness for non-compete agreements.
To be enforceable, a non-compete must meet the following requirements:
(1) the agreement is no greater than is required for the protection of
the legitimate interest of the employer, (2) does not impose undue hard-
ship on the employee, and (3) is not injurious to the public. If any of
these conditions are violated, the agreement is void. Although non-com-
petes are only narrowly enforceable in New York State, the burden falls
on employees to challenge the agreement in court. For low-wage workers
especially, challenging their employer in court is not an option. More-
over, workers are unlikely to know if their non-compete is enforceable
and may be dissuaded from seeking certain jobs out of fear that a former
employer will try to enforce their non-compete. This legislation defines
non-compete clauses and codifies the existing criteria used by courts to
determine the enforceability of non-compete clauses. It further clari-
fies that undue hardship includes, but is not limited to situations
where a worker loses or leaves their job due circumstances surrounding a
declared state of emergency. This definition is not designed to limit or
narrow the existing interpretation of undue hardship, but make clear
that companies may not enforce any non-compete agreements signed by
employees who lost jobs due COVID-19.

 
PRIOR LEGISLATIVE HISTORY:

2020: S8274/A10511 - Died in Labor

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
Immediately.
(1) https://www.epi.org/publication/noncompete- agreements/