Although non-competition agreements are under ongoing attack at the federal and state levels (including being banned in California, Minnesota, North Dakota, and Oklahoma, among others), New York State is not yet ready to join that movement.  Late last month, New York Governor Kathy Hochul vetoed Senate Bill S3100A, which was passed in June 2023 by the NYS Assembly and the Senate and would have prohibited all non-compete agreements.  In vetoing the bill, Governor Hochul expressed concern about the impact that the legislation would have on the interest of the many businesses operating in the state to protect the competitive advantage that key employees bring.

Some of the issues with S3100A were (i) the absence of a salary level above which non-competes would remain lawful; (ii) the effective elimination of the “employee choice doctrine” that allows employers to condition post-employment incentive compensation on the employee’s refraining from competition, and allows employees to decide whether to accept the money and refrain from competing or forgo the payment and take a competing job; (iii) the prohibition of non-competes even in the context of the sale of a business; and (iv) the failure to address the permissibility of employee non-solicitation agreements, while expressly allowing restrictions on customer non-solicitation agreements.

In all likelihood, a different bill will be introduced sometime this year that prohibits non-competes for only lower-and middle-income employees and includes a sale-of-business exception, which was glaring by its omission from Bill S3100A.  The inability to prevent competition by someone who has just been paid a significant amount of money for a business would doubtless chill mergers and acquisitions statewide. 

Stay tuned for further developments.

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