New York Governor Vetoes Proposed Noncompete Ban

On December 22, 2023, New York Governor Kathy Hochul vetoed S3100, a bill which would have prohibited virtually all contractual noncompete agreements restricting workers’ ability to leave their job for a role with a rival business. The bill, passed by both houses of the legislature in June, would have applied to all employers and most individuals, regardless of compensation levels.

The veto comes as a surprise to many as it was anticipated that Governor Hochul would sign the bill into law. In vetoing the bill, Governor Hochul signaled that she would be open to a more limited ban on noncompete agreements, noting that she has “long supported limits on non-compete agreements for middle-class and low-wage workers, protecting them from unfair practices that would limit their ability to earn a living.” It is expected that more limited non-compete legislation will be reintroduced by the New York state legislature in 2024.

Employers should keep in mind that in January 2023, the United States Federal Trade Commission issued a proposed rule which would ban all non-compete clauses in employment agreements throughout the country.  The agency has received more than 26,000 public comments on the proposed rule and no final rule has been issued.  News reports suggest a formal vote on the proposed rule was postponed until at least April 2024.  It is far from certain what any final rule would look like and any such final rule would be subject to legal challenge by employer groups.