Representing financial professionals, financial institutions and investors in investment loss, employment and disclosure matters, and in regulatory investigations nationwide.

New York City Council considering ban on noncompete agreements

On Behalf of | Mar 27, 2024 | Firm Transition

Legislation has been introduced in the New York City Council that would prohibit employers in the city from making workers sign noncompete agreements, after a similar effort failed at the state level.

Noncompete agreements are clauses in employment contracts preventing workers from working for competitor companies during or after their current employment, or starting their own competing business.

The move in the council comes after New York Governor Kathy Hochul vetoed a bill passed by the state legislature last December that would have banned most such noncompete agreements throughout the state.  Hochul called it a “one size fits all approach”, and expressed her preference for a ban that would protect workers earning less than $250,000 instead of those who are more highly compensated.

“I continue to recognize the urgent need to restrict non-compete agreements for middle-class and low-wage workers, and am open to future legislation that achieves the right balance,” the governor said in her veto message.

Following the governor’s veto, three different bills were introduced recently in the City Council that would amend New York City’s Administrative Code to eliminate or severely limit the use of non-compete agreements.

Bill 140 would bar employers from making non-compete agreements with any worker in New York City and cancel non-compete agreements entered before the law takes effect.  The ban would not be limited to non-compete agreements with employees.  “Worker” is broadly defined to include any “natural person who works, whether paid or unpaid, for an employer.

Proposed as an alternative to Bill 140, Bill 146 would ban non-compete agreements for low-wage employees, considered a clerical or other worker under the New York Labor Law.  Another option, Bill 375, limits non-competes for freelance workers, described as a person or a single-person organization hired or contracted to provide services for payment.

The three bills have now been referred by the City Council to a sub-committee on Consumer and Worker Protection.

During the effort to ban noncompetes at the state level, opponents in the financial industry said the agreements are necessary to protect investment strategies and keep highly paid workers from leaving their companies with inside information to work for an industry rival.

Transitioning employment in the financial services industry requires counsel that can evaluate any potential legal implications so you can properly manage risk and focus on transitioning your clients. Lewitas Hyman offers comprehensive and sophisticated counsel to clients nationwide, originating from years of advising financial firms and registered representatives on firm transitions. Whether you are moving to a new firm or looking to form a new one, we will work to limit the risks you face during this transitional period. For more information, contact Lewitas Hyman at (888) 655-6002 or through our online contact form for a free consultation.