Wall Street wins its fight to preserve non-compete clauses

Bloomberg – Democratic Governor of New York State. Cathy Hochul, She vetoed a law that would have banned non-compete agreements between employees in New Yorkafter a severe confrontation Pressure from Wall Street, hospitals and business groups that opposed the measure, According to sources familiar with the matter.

The legislation (S3100), which Hochul rejected, Friday It would have prevented employers from enforcing contract language prohibiting employees or other “covered individuals.”» Obtaining a job after leaving their current jobs.

“After weeks of negotiations in which we made significant concessions to try to pass a law that would at least ban non-competes for low- and middle-wage workers, I am very disappointed that our final offer was rejectedState Sen. Sean Ryan (D), who sponsored the bill, said in a statement.

New York would have become the second most populous state to ban these provisionsThis joins the state of California, which has maintained this restriction for more than a century. toSupporters of the proposal said it would spur innovation and help New York compete with California for talent and startups.Especially in the technology sector.

State lawmakers approved New York's measure in June, along with a broader movement to restrict or ban noncompete agreements, which includes proposals and enforcement actions from both the Federal Trade Commission and the National Labor Relations Board. The ultimate outcome of these federal efforts is uncertain, due in part to lawsuits filed by business groups challenging the agencies' authority to regulate employment contracts.

In recent monthsHochul has been the subject of a lobbying campaign to continue including non-compete clauses in the contracts of employees who earn more than $250,000 a year.. JPMorgan Chase, Goldman Sachs, the New York Health Care Association and the New York Bar Association allegedly lobbied his office, lobbying records show.

At the end of November, the governor told the press that she supported scaling back the legislation in line with the request of business groups, although no agreement was ultimately reached with state lawmakers.

Minnesota this year enacted a complete ban on non-compete agreements between employees, which took effect July 1, the first state to do so in decades.

North Dakota and Oklahoma, along with California, have long held non-compete agreements to be unenforceable, with a few exceptions. At least 11 other states, plus the District of Columbia, restrict non-compete covenants in limited circumstances, preventing companies from enforcing them on low- and moderate-income or hourly workers.

Trade secret exception

Non-compete agreements contractually prevent workers from leaving your company to work for another competitor or from starting their own competing company. The Treasury Department cites data that about 20% of American workers are subject to these types of restrictions, while Minneapolis Fed data for 2023 puts the number at 11%.

Labor advocates, unions and other supporters of banning such contracts say they unfairly restrict workers' job mobility, often limiting low-wage workers who don't have access to company secrets. Industry groups, such as the New York State Business Council, oppose blanket restrictions on non-compete contracts, arguing that companies often use them for legitimate reasons and that courts already set limits on when and how contracts can be enforced.

The New York action would have allowed employers to continue using nondisclosure agreements intended to protect trade secrets and non-solicitation agreements that prohibit an employee from leaving a company and hiring clients for a competing company, as long as the agreement “does not otherwise limit jurisdiction.” A violation of this section.”

Supporters of the rejected bill said they would continue their efforts to ban non-compete agreements despite the governor's veto.

“We will return in 2024 and fight to pass a more comprehensive bansaid Paul Son of the National Employment Law Project.