Assembly Bill A1361

                             
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   1361
 
                        2025-2026 Regular Sessions
 
                           I N  A S S E M B L Y
 
                              January 9, 2025
                                ___________
 
 Introduced by M. of A. DINOWITZ -- read once and referred to the Commit-
   tee on Labor
 
 AN  ACT  to  amend  the labor law, in relation to allowing employers and
   employees to enter into restrictive covenants in certain circumstances
 
   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section  1.  The labor law is amended by adding a new section 191-d to
 read as follows:
   § 191-D. RESTRICTIVE COVENANTS. 1. FOR THE PURPOSES OF  THIS  SECTION,
 THE FOLLOWING TERMS SHALL HAVE THE FOLLOWING MEANINGS:
   A.  "EMPLOYEE"  MEANS  AN  EMPLOYEE  AS  DEFINED IN SUBDIVISION TWO OF
 SECTION ONE HUNDRED NINETY OF  THIS  ARTICLE,  INCLUDING  AN  INDIVIDUAL
 EMPLOYED IN A SUPERVISORY, MANAGERIAL, OR CONFIDENTIAL POSITION.
   B.  "EMPLOYER"  INCLUDES  ANY  PERSON,  CORPORATION, LIMITED LIABILITY
 COMPANY, OR ASSOCIATION EMPLOYING  ANY  INDIVIDUAL  IN  ANY  OCCUPATION,
 INDUSTRY,  TRADE,  BUSINESS  OR SERVICE, AND SHALL INCLUDE THE STATE AND
 ITS INSTRUMENTALITIES AND POLITICAL SUBDIVISIONS, GOVERNMENTAL AGENCIES,
 PUBLIC CORPORATIONS, AND CHARITABLE ORGANIZATIONS.
   C. "FRINGE BENEFIT" MEANS ANY  VACATION  LEAVE,  SICK  LEAVE,  MEDICAL
 INSURANCE  PLAN, DISABILITY INSURANCE PLAN, LIFE INSURANCE PLAN, PENSION
 BENEFIT PLAN, OR ANY OTHER BENEFIT OF ECONOMIC VALUE, TO THE EXTENT THAT
 THE LEAVE, PLAN, OR BENEFIT IS PAID FOR IN  WHOLE  OR  IN  PART  BY  THE
 EMPLOYER.
   D.  "GOOD  CAUSE"  MEANS  A  REASONABLE BASIS RELATED TO AN INDIVIDUAL
 EMPLOYEE FOR TERMINATION OF THE EMPLOYEE'S EMPLOYMENT IN VIEW  OF  RELE-
 VANT FACTORS AND CIRCUMSTANCES, WHICH MAY INCLUDE BUT IS NOT LIMITED TO:
   (I)  THE  EMPLOYEE  ENGAGING  IN  A  PATTERN OF IMPROPER OR DISORDERLY
 CONDUCT;
   (II) NOT WORKING IN AN EFFICIENT  MANNER,  OR  WORKING  BELATEDLY  AND
 NEGLIGENTLY,  OR  IN VIOLATION OF THE STANDARDS OF QUALITY OF THE ESTAB-
 LISHMENT;
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD03248-01-5
              

 A. 1361                             2
 
   (III) REPEATED VIOLATION OF REASONABLE RULES OR  POLICIES  ESTABLISHED
 FOR  THE  OPERATION OF THE ESTABLISHMENT, PROVIDED A WRITTEN COPY OF THE
 RULES OR POLICIES HAS BEEN PROVIDED TO THE EMPLOYEE, PROVIDED  THAT  ANY
 STANDARDS,  RULES  OR POLICIES ARE CONSISTENTLY ENFORCED AND NOT APPLIED
 TO A PARTICULAR EMPLOYEE IN A DISPARATE MANNER WITHOUT JUSTIFICATION; OR
   (IV)  FOR  SERIOUS MISCONDUCT WHICH IS DIRECTLY RELATED TO THE EMPLOY-
 MENT RELATIONSHIP AND HAS A DETRIMENTAL EFFECT ON THE  EMPLOYER'S  BUSI-
 NESS,  AND IN WHICH SITUATION THE EMPLOYER CANNOT REASONABLY BE EXPECTED
 TO TAKE ANY COURSE OTHER THAN TO TERMINATE THE EMPLOYMENT OF THE EMPLOY-
 EE.
   E. "RESTRICTIVE COVENANT" MEANS AN AGREEMENT BETWEEN AN  EMPLOYER  AND
 AN  EMPLOYEE  ARISING  OUT  OF  AN  EXISTING  OR  PROSPECTIVE EMPLOYMENT
 RELATIONSHIP, OR AN AGREEMENT BETWEEN AN EMPLOYER AND AN  EMPLOYEE  WITH
 RESPECT  TO  SEVERANCE  PAY,  UNDER  WHICH  THE  EMPLOYEE OR PROSPECTIVE
 EMPLOYEE AGREES NOT TO ENGAGE IN CERTAIN SPECIFIED ACTIVITIES IN  COMPE-
 TITION  WITH  THE  EMPLOYEE'S EMPLOYER AFTER THE EMPLOYMENT RELATIONSHIP
 HAS TERMINATED.
   2. AN EMPLOYER MAY REQUIRE OR REQUEST THAT AN EMPLOYEE  ENTER  INTO  A
 RESTRICTIVE  COVENANT  AS  A  CONDITION OF EMPLOYMENT OR WITH RESPECT TO
 SEVERANCE PAY AS PROVIDED IN THIS SECTION. A RESTRICTIVE COVENANT  SHALL
 BE ENFORCEABLE TO THE EXTENT THAT IT MEETS THE FOLLOWING REQUIREMENTS:
   A.  (I)  WHERE THE RESTRICTIVE COVENANT IS A CONDITION TO COMMENCEMENT
 OF EMPLOYMENT, THE EMPLOYER SHALL DISCLOSE THE TERMS AND  CONDITIONS  OF
 SUCH  COVENANT IN WRITING TO THE PROSPECTIVE EMPLOYEE EITHER AT THE TIME
 A FORMAL OFFER OF EMPLOYMENT IS TENDERED OR THIRTY BUSINESS  DAYS  PRIOR
 TO THE COMMENCEMENT OF SUCH EMPLOYMENT, WHICHEVER OCCURS EARLIER; OR
   (II)  WHERE A RESTRICTIVE COVENANT IS A CONDITION TO CONTINUE EXISTING
 EMPLOYMENT, OR AS A CONDITION FOR AN EMPLOYEE TO RECEIVE  SEVERANCE  PAY
 FOLLOWING  TERMINATION,  THE EMPLOYER SHALL PROVIDE THE TERMS AND CONDI-
 TIONS OF SUCH COVENANT IN WRITING TO THE EMPLOYEE AT LEAST THIRTY  BUSI-
 NESS DAYS BEFORE ANY SUCH COVENANT IS TO TAKE EFFECT; AND
   (III) THE AGREEMENT SHALL BE SIGNED BY BOTH PARTIES AND SHALL EXPRESS-
 LY  STATE  THAT THE EMPLOYEE HAS THE RIGHT TO CONSULT WITH COUNSEL PRIOR
 TO SIGNING.
   B. THE AGREEMENT SHALL  BE  NO  MORE  RESTRICTIVE  THAN  NECESSARY  TO
 PROTECT  THE LEGITIMATE BUSINESS INTERESTS OF THE EMPLOYER, AND SHALL BE
 LIMITED TO PROTECTING THE EMPLOYER'S TRADE SECRETS.
   C. THE AGREEMENT SHALL BE REASONABLE IN THE SCOPE OF PROSCRIBED ACTIV-
 ITIES IN RELATION TO THE INTERESTS PROTECTED AND  LIMITED  TO  ONLY  THE
 SPECIFIC  TYPES  OF SERVICES PROVIDED BY THE EMPLOYEE AT ANY TIME DURING
 THE LAST TWO YEARS OF EMPLOYMENT.
   D. THE AGREEMENT SHALL NOT PENALIZE AN EMPLOYEE FOR DEFENDING  AGAINST
 OR CHALLENGING THE VALIDITY OR ENFORCEABILITY OF THE COVENANT.
   E.  THE  AGREEMENT  SHALL  NOT  CONTAIN A CHOICE OF LAW PROVISION THAT
 WOULD HAVE THE EFFECT OF AVOIDING THE REQUIREMENTS OF THIS  SECTION,  IF
 THE  EMPLOYEE  IS  A RESIDENT OF OR EMPLOYED IN THE STATE AT THE TIME OF
 TERMINATION OF EMPLOYMENT AND HAS BEEN FOR AT LEAST  THIRTY  DAYS  IMME-
 DIATELY PRECEDING THE TERMINATION OF SUCH EMPLOYMENT.
   F. THE AGREEMENT SHALL NOT WAIVE AN EMPLOYEE'S SUBSTANTIVE, PROCEDURAL
 AND  REMEDIAL  RIGHTS  PROVIDED UNDER THIS CHAPTER, UNDER ANY OTHER LAW,
 RULE OR REGULATION, OR UNDER THE COMMON LAW.
   G. THE AGREEMENT SHALL NOT  RESTRICT  AN  EMPLOYEE  FROM  PROVIDING  A
 SERVICE  TO  A  CUSTOMER OR CLIENT OF THE EMPLOYER, IF THE EMPLOYEE DOES
 NOT INITIATE OR SOLICIT THE CUSTOMER OR CLIENT.
 A. 1361                             3
 
   H. THE AGREEMENT SHALL NOT RESTRICT AN EMPLOYEE FROM WORKING WITH  ONE
 OR MORE OTHER EMPLOYEES WHO MAY ALSO HAVE WORKED FOR OR WITH THE EMPLOY-
 ER IN ANY CAPACITY.
   I. THE AGREEMENT SHALL NOT BE UNDULY BURDENSOME ON THE EMPLOYEE, INJU-
 RIOUS TO THE PUBLIC, OR INCONSISTENT WITH PUBLIC POLICY.
   J.  THE  EMPLOYEE IS TERMINATED FOR GOOD CAUSE OR THE EMPLOYEE RESIGNS
 FROM THE EMPLOYER ON THEIR OWN ACCORD. A RESTRICTIVE COVENANT SHALL  NOT
 BE ENFORCEABLE IF AN EMPLOYER TERMINATES AN EMPLOYEE WITHOUT GOOD CAUSE.
   3.  EVERY EMPLOYER SHALL PROVIDE ITS EMPLOYEES WITH A WRITTEN DOCUMENT
 REGARDING SUCH EMPLOYER'S POLICY ON GOOD CAUSE WITH  RESPECT  TO  TERMI-
 NATION.
   4.  THE  COMMISSIONER  SHALL  HAVE  THE POWER TO RECEIVE, INVESTIGATE,
 ATTEMPT TO RESOLVE, AND ENFORCE A  COMPLAINT  OF  A  VIOLATION  OF  THIS
 SECTION  AND  SHALL  IMPOSE A CIVIL FINE IN AN AMOUNT NOT TO EXCEED FIVE
 THOUSAND  DOLLARS  FOR  EACH  EMPLOYEE  WHO  WAS  THE  SUBJECT  OF  SUCH
 VIOLATION.
   5. THE PROVISIONS OF THIS SECTION SHALL NOT APPLY TO EMPLOYEES COVERED
 UNDER SECTION TWO HUNDRED TWO-K OF THIS CHAPTER.
   § 2. Severability clause. If any clause, sentence, paragraph, subdivi-
 sion,  section  or  part  of  this act shall be adjudged by any court of
 competent jurisdiction to be invalid, such judgment  shall  not  affect,
 impair,  or  invalidate  the remainder thereof, but shall be confined in
 its operation to the clause, sentence, paragraph,  subdivision,  section
 or part thereof directly involved in the controversy in which such judg-
 ment shall have been rendered. It is hereby declared to be the intent of
 the  legislature  that  this  act  would  have been enacted even if such
 invalid provisions had not been included herein.
   § 3. This act shall take effect on the sixtieth  day  after  it  shall
 have  become  a  law  and  shall  apply to agreements entered into on or
 before such date.