Key Takeaways:

• Hochul vetoes non-compete bill

• New York enacts Freelance Isn’t Free Act

• New York enacts the Clean Slate Act

New York remains one of the busiest states from a business perspective, with ever-changing employment laws that affect businesses. This is the first part of a four-part series providing recent New York employment law updates.

Non-Compete Ban Halted In New York

On December 22, 2023, Gov. Hochul vetoed S3100A/A1278, a law passed by the New York State legislature in June 2023. The bill would have created a section in the New York Labor Law, and defined “non-compete agreement” and “covered employees,” prohibited the imposition of a non-compete on a covered employee, voided any non-compete entered into after the effective date of the bill, and provided a mechanism for aggrieved employees to enforce the bill.

While Gov. Hochul voiced support for a prohibition of non-competes on middle-class to low-wage earners, she did not agree with the one-size-fits-all approach the bill employed.

As a result of the veto, non-compete agreements in New York continue to be governed by the landmark Court of Appeals case BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999). In BDO Seidman, the Court of Appeals articulated the “prevailing standard of reasonableness” applied by New York courts in determining the validity of employee agreements not to compete. BDO Seidman held that “a restrictive covenant will only be subject to specific enforcement to the extent that it is reasonable in time and area, necessary to protect the employer’s legitimate interests, not harmful to the general public and not unreasonably burdensome to the employee.”

New York employers that choose to use restrictive covenants in employment agreements should continue to be mindful of the framework of enforceability laid out in BDO Seidman, how BDO Seidman has been applied in specific industries, and potential future legislation in New York that may limit the scope of the enforceability of non-compete agreements.

New York Enacts Freelance Isn’t Free Act

Gov. Hochul signed S5026/A6040, enacting the Freelance Isn’t Free Act (FIFA). FIFA is modeled after a New York City Law, and mandates the payment of freelance workers as independent contractors, including requiring written contracts, timely payment of compensation, and the handling of controversies relating to payment, complaint procedures, and penalties.

The law becomes effective May 20, 2024. Any employer that utilizes independent contractors (with the exception of construction contractors, as defined by the law), should evaluate their independent contractor relationships to first ensure that it is a true independent contractor relationship, and then to confirm compliance with FIFA.

New York Enacts the Clean Slate Act

Gov. Hochul signed S7551A/A1029 enacting the Clean Slate Act.

The law amends the criminal procedure law, the executive law, the correction law, the judiciary law and the civil-rights law. Specifically, it automatically seals certain convictions after a certain passage of time from the imposition of sentence, release from parole or probation, and if the defendant does not have a current charge pending. Notably, the law does not alter employer obligations under the Fair Credit Reporting Act or New York Corrections Law Article 23-A, which prohibits an employer from unlawfully discriminating against a person previously convicted of one or more criminal offenses.

The law goes into effect on November 16, 2024. Employers should review their hiring processes to ensure compliance.