BUFFALO, N.Y. — Non-compete agreements are clauses in employment contracts meant to stop employees from taking another job or starting a business in the same sector they work, typically with time and geographic limits.
"Not many years ago, non-competes were reserved for scientists and top executives but they've really proliferated in the last decade and estimates now (show) that almost 25% of the state’s workforce is under non-competes," New York State Sen. Sean Ryan said.
Ryan sponsored legislation banning the agreements in New York, which passed both houses this year. He said non-competes have become a part of almost every sector, from fast food to high tech.
"We want a free economy,” Ryan said. “We don't want clogs in the economy that prevent it from working and right now the really broad use of non-competes is really bad for the economy. It really clogs it up.”
The state senator believes the legislation is good for the employee who will be more free to make lateral or upward moves, the employer who will have a larger pool of talent to hire and the state with contracts no longer essentially forcing out-migration.
"Employers still have protections against non-disclosures, (trade) secrets, intellectual property rights, stealing of clients,” Ryan said. “All those protections remain.”
Tulley Rinckey attorney Ryan McCall believes the bill is "one of the biggest pieces of legislation that New York has seen in a long time."
McCall said many employers will have to seriously retool their employment agreements moving forward in order to protect corporate interests and conform with state law. He expects one way they will do so is by strengthening non-solicitation clauses.
"Somebody wants to go leave a company, they can and they're not restricted from obtaining employment," McCall said. "However, the employer is also protected because they have protections knowing John isn't going to leave work tomorrow and hire half our workforce and take half of our clients."
Meanwhile, the Federal Trade Commission has proposed a rules change that would apply a similar ban at the national level. Ryan cautioned the proposal, unlike his bill, would not be law and would be at the will of the administration.