In the dynamic arena of labor laws and regulations, New York City is once again leading the charge with proposed changes that could have profound workplace implications. On February 28, 2024, the New York City Council introduced a trio of bills aimed at significantly curtailing the use of noncompete agreements in the Big Apple. Though these bills are currently pending, and it remains to be seen whether they will ultimately be enacted, employers should nevertheless take note of the bills given that they are part of a broader movement to rein in noncompete agreements across the U.S.:

Bill prohibiting all noncompete agreements (Int. 0140-2024)

Bill 0140-2024 is the broadest bill and proposes to enact a comprehensive ban on all non-compete agreements in NYC. Under this proposal, all employers within the city would be subject to the ban, which defines noncompete agreements broadly as any agreements that hinder workers from pursuing employment opportunities elsewhere after leaving their current employer. In addition to prohibiting the formation of new non-compete agreements, the bill mandates the rescission of preexisting noncompete agreements and renders any such preexisting agreements unenforceable.

Violators of the proposed ban would incur a $500 civil penalty per violation, with enforcement overseen by the NYC Office of Labor Standards. Notably, the bill does not provide for a private right of action, placing the onus of enforcement solely on the city agency.

Bill prohibiting non-competes with low wage employees (Int. 0146-2024)

Bill 0146-2024 proposes to bar employers from mandating noncompete agreements for only low wage employees within NYC. The bill relies on the definitions of low wage employees established in the New York Labor Law and excludes specific worker categories such as manual workers, railroad workers, commission salespeople, as well as executive, administrative, and professional employees earning more than $1,3000 per week from its purview. Notably, unlike the “Prohibition of noncompete agreements” bill, this bill would only impact future noncompetes entered into after the effective date.

The bill does not provide precise mechanisms for enforcement, which would be developed by the NYC Office of Labor Standards if the bill passes.

Bill prohibiting noncompetes for freelance workers (Int. 0375-2024)

Bill 0375-2024 is the narrowest of the bills. It focuses on regulating noncompete agreements for only freelance workers in NYC with the aim of facilitating their ability to secure employment without undue constraints. This proposal stipulates that freelancers may only be subjected to noncompete agreements if they receive compensation in exchange.

Notably, unlike two bills mentioned above, this bill introduces a private right of action for freelancers, empowering them to seek the nullification of noncompete agreements, along with statutory damages and civil penalties for any violations encountered. Additionally, the NYC Corporation Counsel would be tasked with investigating and litigating against employers found to engage in patterns or practices of non-compliance with the law.

What this means for employers

At present, these bills are all just proposals. That said, they are part of a broader movement to limit or outright ban noncompete agreements in the U.S. Reed Smith’s team of experienced lawyers will thus continue to monitor these bills and are available to provide employers with guidance and exploration of alternative strategies to protect their interests effectively.