[US] NY bill banning noncompete clauses could mark employment law shift

In the US, the days of organisations having the ability to limit the job prospects of an exiting employee could be coming to an end. A federal rule to eliminate noncompete clauses in workers’ contracts is in the works and pressure to end the practice is growing from states, Resourceful Finance Pro reports.

New York state legislators recently sent a bill that bans noncompete clauses to Governor Kathy Hochul. Democrats crafted the bill and the governor is expected to sign it.

Confidentiality agreements are still reportedly allowed under New York’s new law and companies can insist on non-solicitation deals to prevent outgoing workers from potentially poaching company clients. Employers lobbied to keep such measures to protect proprietary data or “trade secrets.”

Employees in New York currently working under noncompete clauses will not benefit from the legislation. The bill prohibits future use of noncompete clauses, not current restrictions. This applies to typical one-year restrictions on who an ex-employee can work for and shorter clauses.

“Noncompete agreements are bad for workers, bad for consumers, and bad for the economy,” New York state Senator Sean Ryan said. “[The law] will also create a lasting positive impact on our state’s job market, allowing businesses to hire the best candidates for vacant positions.”

Somewhere between a quarter to 40 per cent of employees (around 30 million people) are reportedly working under noncompete agreements with their employers, with figures varying between sources. Many employers are quick to seek legal action if a departing worker goes to work for a company in the same field.

New York has now joined California, Oklahoma and North Dakota in banning noncompete clauses in their states. California’s provision prohibits any contract that restricts an individual from “engaging in a lawful profession, trade, or business.”

Earlier this year, the Federal Trade Commission (FTC) proposed to ban noncompete clauses.

Industry groups and Wall Street reportedly lobbied the FTC to narrow the rule, eliminating high-paid employees. The passage of New York’s law is said to be likely to make FTC regulators and agency chief Lina Khan unsympathetic to these pleas. Republicans in Congress are less responsive to Wall Street and corporations so the rule is likely to come into force.

Finance is among the top, possibly the top, sectors where noncompetes are implemented and many CFOs reportedly see noncompetes as a necessary talent retention tool.

Source: Resourceful Finance Pro

(Link and quotes voa original reporting)

In the US, the days of organisations having the ability to limit the job prospects of an exiting employee could be coming to an end. A federal rule to eliminate noncompete clauses in workers’ contracts is in the works and pressure to end the practice is growing from states, Resourceful Finance Pro reports.

New York state legislators recently sent a bill that bans noncompete clauses to Governor Kathy Hochul. Democrats crafted the bill and the governor is expected to sign it.

Confidentiality agreements are still reportedly allowed under New York’s new law and companies can insist on non-solicitation deals to prevent outgoing workers from potentially poaching company clients. Employers lobbied to keep such measures to protect proprietary data or “trade secrets.”

Employees in New York currently working under noncompete clauses will not benefit from the legislation. The bill prohibits future use of noncompete clauses, not current restrictions. This applies to typical one-year restrictions on who an ex-employee can work for and shorter clauses.

“Noncompete agreements are bad for workers, bad for consumers, and bad for the economy,” New York state Senator Sean Ryan said. “[The law] will also create a lasting positive impact on our state’s job market, allowing businesses to hire the best candidates for vacant positions.”

Somewhere between a quarter to 40 per cent of employees (around 30 million people) are reportedly working under noncompete agreements with their employers, with figures varying between sources. Many employers are quick to seek legal action if a departing worker goes to work for a company in the same field.

New York has now joined California, Oklahoma and North Dakota in banning noncompete clauses in their states. California’s provision prohibits any contract that restricts an individual from “engaging in a lawful profession, trade, or business.”

Earlier this year, the Federal Trade Commission (FTC) proposed to ban noncompete clauses.

Industry groups and Wall Street reportedly lobbied the FTC to narrow the rule, eliminating high-paid employees. The passage of New York’s law is said to be likely to make FTC regulators and agency chief Lina Khan unsympathetic to these pleas. Republicans in Congress are less responsive to Wall Street and corporations so the rule is likely to come into force.

Finance is among the top, possibly the top, sectors where noncompetes are implemented and many CFOs reportedly see noncompetes as a necessary talent retention tool.

Source: Resourceful Finance Pro

(Link and quotes voa original reporting)