Q. Did New York institute a ban against noncompete agreements?

A. No. In a significant victory for New York businesses, New York Governor Kathy Hochul vetoed a bill that aimed to ban noncompete agreements within the state.

The proposed legislation, which was passed by the New York State Legislature earlier this year, sought to prohibit all noncompete agreements, except under limited circumstances. The bill was intended to enhance labor mobility and prevent restrictions on employees’ ability to seek employment in their chosen fields.

In vetoing the bill shortly before Christmas, Governor Hochul indicated a willingness to sign future legislation protecting middle-class and lower-wage workers from noncompete agreements. However, she stated that the current bill was a “one size fits all” approach that failed to recognize the role noncompete agreements can play in protecting businesses’ trade secrets, customer relationships, and other proprietary interests with regard to highly compensated talent.

Under current law, while noncompete provisions remain largely disfavored by New York courts, they remain enforceable when an employer can prove that they are (i) necessary to protect legitimate business interests, (ii) reasonable in time and geographic reach, (iii) not harmful to the general public, and (iv) not unreasonably burdensome on the employee.

Troutman Pepper will continue to monitor developments in this area and provide updates as necessary. We encourage businesses to review their use of noncompete agreements and consult with legal counsel to ensure compliance with existing laws and regulations.