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Legal & Legislative

ALERT: NYC Proposes Ban on Non-Competes

ALERT: NYC Proposes Ban on Non-Competes

Authors: Mark S. Goldstein and Cindy Schmitt Minniti 

New York City, which for years has been a trailblazer in employee-friendly workplace legislation, is at it again. Late last month, the NYC Council proposed a bill that would prohibit non-compete agreements for low-wage workers.  The bill would also bar non-competes for all other employees, if the potential that the employee might be asked to sign a non-compete is not disclosed, in writing, at the beginning of the hiring process.  As is often the case with NYC employment legislation, this is a first-of-its-kind bill.

More particularly, the bill states, quite simply, that “[n]o employer shall enter into a covenant not to compete with any low-wage employee of such employer.” The term “covenant not to compete” is, in turn, defined as any agreement “between an employee and an employer that restricts such employee from performing 1) work for an employer not a party to such agreement for a specified period of time; 2) work in a specified geographical area for an employer not a party to such agreement; or 3) work for an employer not a party to such agreement that is similar to such employee’s work for the employer who is a party to the agreement.”

As noted above, the proposed restriction would only apply to “low wage employees.” According to the bill, a “low wage employee” is any employee who is not a “manual worker,” “railroad worker,” or “commission salesman,” as those terms are defined under Article 6 of the New York Labor Law.  The prohibition would also not apply to an individual employed in a bona fide executive, administrative, or professional capacity earning more than $900/week.

Although it has garnered far less attention, it is the bill’s disclosure requirement for non-low-wage workers that may have far greater implications. In this regard, the bill would bar employers from requiring any non-low-wage prospective employee to sign a non-compete agreement, unless the employer disclosed the potential for such an agreement in writing at the beginning of the hiring process.  The potential implications of this proposed ban – particularly as it relates to the hiring of executives and other senior employees – could be significant.

While the bill is certainly a long way from becoming law, employers that require employees to sign non-compete agreements should nevertheless monitor the bill’s progress. In the likely event that the bill is enacted in some shape or form, such employers will need a prompt plan to ensure future compliance (notably, the bill would only apply to agreements signed after the date the bill takes effect).

Mark S. Goldstein is a senior associate in the New York office of Reed Smith and a member of the firm’s Labor & Employment. Cindy Schmitt Minniti is the Managing Partner of the New York office. 

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