New York could become the latest state to ban noncompetes
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New York could become the latest state in the U.S. to ban noncompete agreements. A bill passed the state's Assembly earlier this week and is now on the governor's desk.
Why it matters: There's new energy around banning or limiting the use of these often-criticized agreements, which prevent people from working for a new employer for a period of time after they leave a job.
- That new buzz is thanks in part to the Federal Trade Commission's proposal earlier this year to ban them nationally.
State of play: Minnesota passed a law banning noncompetes last year; it will go into effect July 1.
- Washington, D.C.'s ban went into effect this year, making the agreements unenforceable for those earning less than $150,000 a year, or medical specialists who make under $250,000.
- Nine other states, including Colorado, Illinois, and Oregon have laws — all passed since 2019 — limiting noncompete agreements to higher earners.
- Three states have had noncompete bans in place for more than a century: California (since 1872), North Dakota (1865) and Oklahoma (1890).
There's a feedback loop happening between the states and the federal government, "acknowledging that noncompetes in any way, shape or form are a real problem," said Pat Garofalo, director of state and local policy at the progressive American Economic Liberties Project.
Yes, but: It's unclear whether New York's Democratic governor Kathy Hochul will sign the bill into law — her office didn't respond to emailed questions.
- "We hope the governor would veto," said Patrick Bailey Director of Communications at the Business Council of New York, which represents about 3,200 businesses in the state.
- Employers think the law would make it more difficult to retain talent, he said.
Catch up fast: Banning these agreements has been on the Democratic agenda since President Obama first urged the states to act in 2016.
- The move to limit noncompetes, especially for entry-level or low-wage workers, comes after years of stories about how they were prevented from taking new jobs.
- The FTC estimates that about one in five workers — 30 million people — are bound by these kinds of agreements.
One example: When a chiropractor in New York was fired from her job last year, her boss told her they would still enforce her noncompete — prohibiting her from working within a 25-mile radius of her employer for two years, according to testimony she gave on New York's legislation.
- "So now, I am jobless, in a lot of student loan debt and not allowed to work within a 25-mile radius of my home," she said in prepared testimony.
What we're watching: The future of the proposed FTC ban is murky. Experts have told Axios that if enacted, it could get overturned in court.
- But state laws — in place for hundreds of years without controversy — don't face the same kind of legal hurdles.
