The clock is ticking on New York’s antitrust law – antitrust, EU competition

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While many members of the antitrust community have focused on the FTC’s proposed noncompete, states have also been active in this area. Earlier this year, the New York legislature passed a broad non-competition, which has been waiting for Governor Hochul’s approval for several months. Governor Hochul had expressed supporting non-competes for workers who earn below the state median wage. A bill that is pending approval, but is not so limited.

The governor has until the end of the year to approve the bill or not. Or the bill could be sent back to the Legislature with chapter amendments, as suggested by the article linked below. It wouldn’t be surprising if the governor tried to narrow the scope of the ban, such as to only apply to workers who earn below the state median wage and possibly include an M&A exemption (more on that below). Time will show.

Since the ban proposed in the current bill would take effect 30 days after the governor’s approval, it makes sense for companies with employees in New York to be prepared to comply on short notice.

The prohibition against competing in the current New York bill is broad and in some respects vague, including the following:

  • Non-competitive mergers and acquisitions: The bill is silent on non-competition of business sales (i.e., mergers and acquisitions), which allowed other prohibitions as well. There are good arguments that such non-competes are appropriate, but the current bill is unfortunately silent on the subject.

  • Paid garden leave: The bill is also silent on whether paid non-compete periods, such as garden leave arrangements, would be legal.

  • Earn to protect trade secrets: The prohibition contains several limited exceptions, including allowing protection of trade secrets and confidential client information, as well as unsolicited client agreements. But under the bill, even these exceptions must not otherwise restrict competition in violation of the section. Despite this ambiguity, employers should strongly consider these exceptions.

Non-competition law is evolving and varied, making compliance challenging. Looking beyond New York, several states have also enacted various versions of non-competes, including California, Minnesota, North Dakota, and Oklahoma. And of course earlier this year the FTC proposed a blanket non-compete ban – as discussed here Axinn Insight – which, unlike NY law, also applies retroactively. FTC accepted nearly 27,000 comments on the proposed rule, and the final version of the proposal is expected to be voted on in April 2024. If the final rule is similar to the proposed rule, it will likely face significant legal challenges, as noted in
Axinn Insightwhich means continued turbulence in this important area for both employers and employees.

New York’s non-compete law is not expected to go into effect without chapter amendments to address various issues, including sector-specific exemptions or buyer protection provisions for M&A transactions.…

The content of this article is intended to provide a general guide to the issue. Professional advice should be sought regarding your particular situation.

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