Members of the New York City Council are looking to accomplish what the New York State Legislature could not – proposing various bans on the use of non-competes in New York City. On February 28, 2024, members of the New York City Council introduced three bills that are aimed, to varying degrees, at reducing or eliminating the use of non-competes. These three bills range from a total ban on non-competes to a low-wage threshold on the use of non-competes to a ban on the use of non-competes for freelancers. Over the past several years, bills of this nature have been proposed by the New York City Council and failed to advance, but with the renewed public interest from the state legislature’s recent attempt at a total ban on non-competes, and the Federal Trade Commission’s upcoming rulemaking, it is possible that the City Council will have greater traction this time around.

As proposed, the City Council’s three bills include the following provisions:

• Bill No. Int 0140-2024
  • Prohibits employers from entering into non-compete agreements with employees generally.
  • Rescinds any noncompete agreements that predate the effective date of the bill.
  • Subjects employers to a $500 civil penalty for each violation.
• Bill No. Int 0146-2024
  • Prohibits employers from entering into noncompete agreements with low-wage employees.
  • Defines “low-wage employees” as employees other than those who are employed in a bona fide executive, administrative, or professional capacity and earn at least $1,300 per week.
  • For non-low-wage employees, requires employers to disclose, at the beginning of the hiring process, that the non-low-wage employee may be subject to a non-compete.
  • Enforced by the NYC Office of Labor Standards.
• Bill No. Int 0375-2024
  • Prohibits persons from requiring freelance workers to enter into non-compete agreements unless the hiring party agrees to compensate the freelance worker during any period in which a non-compete agreement would be in place.
  • Defines “freelance worker” as any person or one-person organization that is hired or retained as an independent contractor by a hiring party to provide services in exchange for compensation.
  • Does not include as a freelance worker: (i) a sales representative under New York Labor Law § 191; (ii) a person engaged in the practice of law; (iii) a licensed medical professional; and (iv) any individual, partnership, corporation, or other entity admitted to membership in the Financial Industry Regulatory Authority.
  • Allows a private right of action for freelance workers to seek declaratory judgment voiding the non-compete, statutory damages of $1,000, and reasonable attorneys’ fees.
  • Allows the NYC Corporation Counsel to commence a civil action seeking a penalty of up to $25,000 for a pattern or practice of violations.

Notably, only the first proposed bill, Int 0140-2024, comes close to the proposal by the New York State Legislature that would have voided “[e]very contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind.” This bill was vetoed by Governor Hochul due to its extremely broad reach, which in the governor’s opinion did not address companies’ legitimate interests in New York State’s “highly competitive economic climate.” Whether the rest of the City Council or Mayor Eric Adams agrees with the governor’s decision remains to be seen.

Baker Hostetler’s New York Labor and Employment team is monitoring these bills as they work their way through New York City’s legislative process. Further updates with be forthcoming.

[View source.]