Hochul Calls for Scaling Back New York Non-Compete Ban Proposal

Gov. Kathy Hochul (D) says she supports reducing the reach of a bill to bar employee non-competes in New York state that’s awaiting her signature, aligning her with Wall Street and business groups that seek to keep the ban from covering higher earners.

The bill (SB 3100), as passed by the legislature in June, would outlaw virtually all non-competes. It would take effect in 30 days if signed by Hochul before the end of the year.

“What I’m looking at right now is striking the right balance between protecting low and middle-income workers, giving them flexibility to have mobility to go from job to job as they continue up the ladder of success,” Hochul told reporters Thursday in New York City. “But those who are successful have a lot more negotiation power, and they’re at the industries that are an important part of our economy here in New York.”

The state proposal has drawn aggressive lobbying both from opponents and supporters of a California-style ban as the Federal Trade Commission simultaneously considers its own proposal to limit non-competes. New York lobbying records show a range of businesses and labor groups pressuring lawmakers and Hochul on the bill in September or October, including AFSCME International, Charter Communications, Goldman Sachs, and JPMorgan Chase Holdings.

The business groups have said they would like Hochul to revise the measure to ban non-competes for lower- and middle-income workers but continue to allow them for higher-earning jobs, similar to the approach about a dozen other states have taken. Their proposed revisions also would allow owners and partners to sign non-competes as part of a sale or merger of their businesses, which is generally allowed even in California and the few other states that otherwise ban non-competes.

New York’s “chapter amendment” legislative process allows Hochul to negotiate changes with the Assembly and Senate on bills in return for signing them. Lawmakers then approve any changes after they reconvene the following year.

State Sen. Sean Ryan (D), the bill’s sponsor on the Senate side, said shortly after Hochul’s comments Thursday, which he had not yet heard, that he remains willing and open to negotiations. But he led a press conference two days earlier with a coalition of advocacy groups calling on Hochul to sign the bill and touting the benefits of widely banning non-competes, not just for low-wage workers.

The idea of an income cap protecting only lower- and middle-income workers creates a bigger point of contention than allowing non-competes in cases of mergers and acquisitions, according to Ryan.

Ryan said he is “more than open” to revising the bill as it relates to sale of businesses.

A $250,000 annual income cap floated by the state’s business community would capture many workers across industries who are nowhere near the C-suite level, said Ryan. Banning non-competes would fuel economic growth in the tech sector in particular he said.

Business groups including the Partnership for New York City have been arguing for a cap around that amount, which they say would protect lower-level workers but still help businesses defend trade secrets that salaried and executive-level employees could carry off to competitors.

“We make the case that this would fundamentally diminish New York’s status as a financial capital,” said Kathryn Wylde, CEO of the city business leaders’ group.

Others in New York have advocated for the bill to remain largely the same, including a coalition that sent a letter to Hochul on Thursday, urging her to sign it.

Scaling back the bill with an income cap would cause New York to miss the benefits of innovation in technology industries that California’s longstanding non-compete ban has yielded, said John Lettieri, CEO of the Economic Innovation Group, which is one of the letter’s signatories.

“This is a once-in-a-generation opportunity to advance a pro-growth, pro-innovation economy in New York, and I’m afraid they’re going to blow it,” Lettieri said, citing a recent exit of tech workers from the state.

At least 11 states plus the District of Columbia have banned employers from imposing non-competes on workers below certain wage thresholds, but most have stopped short of an outright ban.

Four others—California, Minnesota, North Dakota, and Oklahoma—ban virtually all employee non-competes, with narrow exceptions for those with an ownership stake when a business is sold.