Earlier this year, New York Governor Kathy Hochul vetoed proposed legislation that would have banned non-compete agreements in New York State. In the wake of that failed legislation, the New York City Council has proposed three new bills to amend the New York City Administrative Code to outlaw or significantly restrict non-compete agreements in the city.

Bill 140 proposes an across-the-board prohibition on all non-compete agreements in New York City, including those that predate the bill. Under Bill 140, an “employer” is any “person that hires or contracts with a worker to work for a person.” Bill 140’s sweeping prohibition applies not just to employees, but to any type of “worker,” including independent contractors and possibly consultants. A violation of any provision of the Bill would result in a civil penalty of $500 per violation.

The two other bills propose alternative and lesser restrictions, and would only have consequences if the all-out ban does not pass. Bill 146 would eliminate non-competition agreements for “low-wage” employees, and protect these low-wage employees from restrictions on their mobility. Under Bill 146, a “low-wage employee” is a “clerical or other worker” as defined in §190(7) of the New York Labor Law, and specifically excludes manual workers, railroad workers, commissioned salespersons, and persons in a “bona fide executive, administrative or professional capacity” whose earnings exceed $1,300 per week. An “employer” includes “any person, corporation, limited liability company, or association employing any individual in any occupation, industry, trade, business or service.” The Bill provides protections for employees who are not by definition “low-wage”, by requiring that an employer disclose in writing during the hiring process that the employee may be subject to a covenant not to compete upon hire. If the written disclosure is not made, the employer may not later subject that employee to a non-competition agreement.

The final proposed legislation is Bill 375, which would prohibit any “hiring party” from entering into non-competes with freelance workers, unless the hiring party agrees to compensate the freelance worker during the restricted period. A “freelance worker” can be an individual or organization hired or contracted to provide services for payment, but does not include sales representatives, lawyers, licensed medical professionals, and members of the Financial Industry Regulatory Authority.  A “hiring party” means “any person who contracts with a freelance worker to provide any service.” Bill 375 creates a private right of action for freelance workers to seek a declaratory judgment that a non-competition agreement is void, with the ability to recover attorneys’ fees. Like Bill 140, Bill 375 includes the imposition of civil penalties for violating any provision of the bill of $500 per violation.

Whether these bills will meet the same fate as the proposed state-wide ban remains to be seen. What is clear is that efforts to restrain employee mobility in New York City will be closely scrutinized, requiring employers to stay abreast of developments and be mindful of the restrictive covenants they enter into with their employees and independent contractors.

If you have any questions regarding the information covered in this blog, please contact Valeria Castanaro Galotta,  Daniel Hoffman, John Baranello, or your primary attorney at Moses Singer.