“Re-do” bill would fundamentally change New York non-compete law

Two years ago, a bill that would have effectively gutted New York non-compete law made it as far as the Governor’s desk where Gov. Kathy Hochul (D) vetoed it, much to the relief of the New York business community. However, the bill’s sponsors have retooled it, trying to overcome the Governor’s veto. 

In its new incarnation, Senate Bill 4641A (introduced February 10, 2025) provides that:

No employer or its agent, or the officer or agent of any corporation, partnership, limited liability company, not-for-profit corporation or association or other entity, shall seek, require, demand or accept a non-compete agreement from any covered individual or health related professional. Any non-compete agreement sought, required, demanded or accepted after the effective date of this section shall be null, void, and unenforceable.

The law would be effective thirty days after the Governor signs it. In essence, except for highly compensated individuals earning over $500,000 and certain healthcare professionals, non-competition agreements would, going forward, no longer be enforceable in New York.

Adding insult to injury, the bill would create a private right of action against an employer who “requires, demands or accepts” such an agreement, allowing for damages that include attorney’s fees and up to $10,000 in liquidated damages for each violation. 

Significantly, this bill would not impact an employer’s ability to enter into strong non-solicitation agreements with employees. 

If this bill becomes law, New York restrictive covenant law would be aligned with California law and would represent a significant departure from the “enforceable if reasonable” position of sister states New Jersey, Connecticut, and Pennsylvania. The New York City financial sector would be particularly hard hit by the bill’s passage.

Because non-competition agreements generally protect internal knowledge of company intellectual property and business planning, businesses in New York relying on non-competition agreements to protect their non-client confidential and proprietary information would be wise to take a hard look at non-disclosure agreements, which, in tandem with New York’s common law protecting trade secrets, may be the only protection afforded to New York employers if this bill becomes law.