July 1, 2025

Updates to State Bill Banning Certain Non-Compete Agreements

By Laura Trachtman

New York State Senator Sean Ryan has introduced another bill banning non-compete agreements in New York.  The bill, S4641, has passed the State Senate and is currently before the Assembly. This is the third bill addressing non-competes since 2021.  Hopefully, the third time’s the charm.  

What are non-compete agreements? Non-compete agreements are agreements between an employee and employer where the employee agrees that, after their employment ends, they may not engage in whatever they’ve been doing for a period of time and in a specific geographic area. 

Why are we talking about this? Non-compete agreements are a vital issue in employment law. If you sign an employment contract that has a non-compete provision, you could find yourself bagging groceries at the local supermarket for the next year instead of engaging in whatever work you have specialized in for the past years/decades.  (More on that later.)

Why did my employer make me sign this? Your employer has, in theory at least, invested time, energy and money in making you the standout employee you are today, and your employer does not want you to take what you learned at their expense and port it to a competitor.  

Is that legal? That’s the question I’m addressing today. Right now, yes, it’s completely legal in certain situations, although they are not nearly as enforceable as people think.  The bill above, S4641, wants to change that.  

How will the bill change that? S4641 purports to limit non-competes to “highly compensated individuals” – those who are making greater than $500,000 per year. S4641 also states that health related professionals (physician, PA, chiropractor, dentist, etc.) are not subject to non-competes. Lawyers are not excluded.  Womp womp. 

What happens if the bill is not passed? If the bill isn’t passed or Governor Hochul refuses to sign it, and she has refused to sign previous iterations of a non-compete ban, employees still have the protections of the Courts. 

The Courts have already addressed the merits of a non-compete, so I’ll run through this quickly.  New York has a strict policy against restraint of trade.  “In general, we have strictly applied the rule to limit enforcement of broad restraints on competition.” BDO Seidman v. Hirschberg, 93 NY2d 382, 389 (1999). This makes sense, as there’s a general policy against restraining trade, as trade makes money and the State likes money.  However, non-competes restrain trade by preventing qualified individuals from getting new jobs – so how does that work?  

It means that Courts will only enforce a non-compete if it is  “(1) necessary to protect the employer’s legitimate interests; (2) reasonable in time and area; (3) not unreasonably burdensome to the employee; and (4) nor harmful to the general public” Id., at 388-89. In other words, the employer has to have a really good reason to enforce the non-compete.  It also has to be reasonable in time and distance – if you’re working in New York, and you get a job offer in Abu Dhabi, well, enforcing the non-compete is going to be hard for the employer, as Abu Dhabi is rilly rilly far from New York, and the employer will have an uphill battle justifying how a job in Abu Dhabi will endanger the employer’s legitimate interests.  The non-compete must also not be unreasonably burdensome to the employee.  That means that the employee has to be able to get a job in another area – an employer can’t just expect a person to be unemployed for a year, or bagging groceries, as I referenced above.  Finally, the non-compete has to not harm the general public. 

My final point today about the Courts and enforcement of non-competes is that the Courts have held that  “…the only justification for imposing an employee agreement not to compete is to forestall unfair competition.”  Id., at 391. That means that if the employee is going to engage in fair competition, there’s no reason to enforce the non-compete.  

Does this mean that the employee always gets out of a non-compete if they can demonstrate that they will only engage in fair competition?  No, because there are so many other variables, especially the employee’s risk tolerance; not everyone is interested in damning the torpedoes and going full speed ahead, especially when there’s a better than average chance of landing in court. This is a frustrating situation, especially as one who believes in the Court system, as it can dissuade a qualified and worthy employee from moving forward with their professional endeavors. 

And that’s the real reason why New York needs a non-compete ban enacted by the legislature – while employers tend to have the advantage over employees in the Court systems (generally – with access to greater resources, etc.), the situation is different if there’s an actual law against non-competes.  And while the $500,000 cap is frustrating for me, as an attorney who represents individuals who earn that much, one hopes that an employee will negotiate either a waiver or a garden leave.