Once again, the New York State legislature has initiated legislation that would ban nearly all employee non-competes. Introduced on February 10, 2025, Senate Bill S4641A seeks to prohibit non-compete agreements for health related professionals and workers who earn less than $500,000 per year.
This is the New York State legislature’s second attempt at banning non-competes. In June 2023, the legislature proposed a total ban on all non-competes for all workers, regardless of their salary level. Although the bill passed both houses, Governor Kathy Hochul eventually vetoed it, but announced support for a narrower law.
The current iteration attempts to address Gov. Hochul’s previous concerns by imposing a compensation threshold above which non-competes may be permitted, banning them for health-related professionals, permitting non-competes following the sale of a business, and imposing certain requirements for a permissible non-compete to be enforceable.
Overview of the Senate Bill
The proposed bill would amend New York Labor Law 191-d to prohibit employers from seeking, demanding, or accepting non-compete agreements from any “covered individual” or “health related professional.”
A “non-compete agreement” is defined as any agreement “between an employer and a covered individual that prohibits or restricts such covered individual from obtaining employment after the separation of employment with the employer.”
In turn, a “covered individual” is “any person other than a highly compensated individual who, whether or not employed under a contract of employment, performs or has performed work or services for another person on such terms and conditions that they are, in relation to that other person, in a position of economic dependence on, and under an obligation to perform duties for, that other person.”
“Health related professionals” include New York licensed physicians, physician assistants, physical and occupational therapists, nurses, pharmacists, optometrists, perfusionists, chiropractors, dentists, veterinarians, speech pathologists, audiologists, and mental health practitioners.
Exceptions
The proposed bill does not prohibit non-competes with highly compensated individuals or following the sale of a business:
- Highly compensated individuals. Employers would be permitted to enter into non-compete agreements with highly compensated individuals, who are compensated in cash at an average annualized rate of $500,000 or more per year, as determined by the income on the individual’s three most recent W-2 statements and K-1 statements (where applicable). This annual compensation rate would be adjusted annually as of 2027.
- Sale-of-business. Non-compete agreements would be permitted in the sale of the goodwill of a business or the sale or disposition of a majority of an ownership interest in a partnership or limited liability company (LLC), where the seller owns at least 15% of that business, partnership, or LLC.
Limitations
Any permissible non-compete would continue be subject to New York’s common law rules regarding enforceability and would also be subject to two express limitations. Specifically, any non-compete agreement that is permissible or enforceable shall: (1) not be longer than one year, and (2) provide for payment of salary to the individual during the period of enforcement of the non-compete.
Permissible Agreements
Provided that such agreements do not otherwise restrict competition, the proposed bill allows employers to execute agreements with prospective or current covered individuals or health related professionals that:
- Establish a fixed term and/or exclusivity during employment;
- Prohibit the disclosure of trade secrets;
- Prohibit the disclosure of confidential and proprietary client information; or
- Prohibit the solicitation of the employer’s clients.
Notably, the proposed bill does not include employee non-solicitations in its list of permissible agreements.
Private Right of Action and Notice
Finally, the bill creates a private right of action against employers or others for violations of the non-compete ban. Aggrieved covered individuals would have up to two years to seek injunctive relief, liquidated damages (up to $10,000 per individual), lost compensation, compensatory damages and reasonable attorneys’ fees and costs. Additionally, the bill requires employers to post a notice informing their employees of their protections and rights under the law.
What’s Next?
The bill is currently in Committee before the Assembly. If it advances, it will move to the floor for a vote, and if it passes both houses there, it will land on Gov. Hochul’s desk for her signature.
If the bill becomes law, the ban will take effect 181 days later, after which any non-compete agreement would be null, void, and unenforceable unless it falls within one of the exceptions. Existing non-compete agreements would remain enforceable, as the law would have no retroactive effect. However, if the law goes into effect, employers will have to review all new agreements to ensure they are carefully drafted to comply with the law.
