Non-Competition Clauses

The New York State legislature recently passed a bill that, if approved by Governor Hochul, would effectively ban all non-compete agreements in New York. The bill would become effective 30 days after it is signed by the Governor.  If this bill becomes law, New York would join a larger nationwide push to ban non-competes, following behind Minnesota, California, North Dakota, and Oklahoma, all of which have passed similar legislation.

In addition to action on the state level, there has been movement on the federal level to ban non-compete agreements. As previously discussed in RMF’s “Most Non-Competes Violate Federal Law According to NLRB General Counsel” blog post, the National Labor and Relations Board has recently issued a memorandum finding that a majority of non-compete agreements violate the National Labor Relations Act.  This trend is further emboldened by the prior directive of President Biden to the Federal Trade Commission to issue a rule banning, or at least limiting, most non-compete agreements in the United States.  More information regarding the Federal Trade Commission’s proposed rule is outlined in RMF’s “What Employers Should Know About the FTC’s Proposed Ban on Non-Competition Clauses” blog post.Continue Reading Is It The Beginning of the End for Non-Compete Agreements in New York?

On May 30, 2023, General Counsel to the National Labor Relations Board (“NLRB”) issued a memorandum (“Memo”) informing its regional offices of the agency’s current stance on the enforceability of employee non-competition agreements. In brief, the NLRB’s position is that most non-competes imposed against non-supervisory employees violate the National Labor Relations Act (“NLRA”). The Memo is the latest effort by the Federal Government to curb employers’ reliance on non-competes following the Federal Trade Commission’s proposed ban of these clauses earlier this year.Continue Reading Most Non-Competes Violate Federal Law According to NLRB General Counsel

Many employment contracts contain non-competition clauses. There has long been a body of case law limiting the enforceability of these restrictive covenants in New York. For example, under the so-called BDO Seidman test, a non-compete provision is only enforceable if it is no greater than required to protect the legitimate business interests of the employer, does not impose undue hardship on the employee, and is not injurious to the public. See generally BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999).

The BDO Seidman test and other judicially created rules governing non-competition clauses may soon fall by the wayside. On January 5, 2023, the Federal Trade Commission (FTC) issued a proposed rule (PR) that would largely ban non-competition provisions throughout the United States. The PR follows an executive order issued by President Biden on July 9, 2021, which urged the FTC to “curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.”Continue Reading What Employers Should Know About the FTC’s Proposed Ban on Non-Competition Clauses