On June 9, 2025, the New York State Senate passed Senate Bill S4641A (the “Bill”).  The Bill, if signed into law, would prohibit most non-compete agreements (“non-competes”) throughout the state, except for those with highly compensated workers or in connection with the sale of at least 15% of a business.  The New York State Assembly is now considering the Bill.

The Bill is a revised version of a bill proposed in 2023, which would have broadly banned all non-competes and did not include a sale-of-business exception.  Governor Kathy Hochul vetoed the 2023 bill, criticizing its “one-size-fits all approach” as failing to achieve the right “balance” of “restrict[ing] non-compete agreements for middle-class and low-wage workers,” while “allowing New York’s businesses to retain highly compensated talent.”  

The new Bill addresses Governor Hochul’s stated concerns and answers some key questions raised by its predecessor:

• Covered individuals. The Bill would prohibit non-competes with all New York workers, including remote workers reporting to a New York worksite or supervisor, and certain health related professionals, except it would not apply to highly compensated workers earning average “cash compensation” of $500,000 or more per year and certain broadcast employees.  “Cash compensation” would be calculated as an average of the compensation on “the individual’s three most recent W-2 statements and … K-1 statements, or all such statements from the duration of the individual’s employment if the term of employment is less than three years ….”  The cash compensation threshold would be subject to annual adjustments beginning in 2027.
• Choice of law and venue restrictions. The Bill would make non-New York choice of law or venue provisions unenforceable if their effect would be to “avoid[ ] or limit[  ] the requirements” of the ban for any covered individual who is and has been, for at least 30 days before ending their employment, a resident of or employed in New York (including remote workers).
• Non-compete defined. The Bill defines a “non-compete agreement” as “any agreement, or clause contained in any agreement, between an employer and a covered individual that prohibits or restricts such covered individual from obtaining employment, after the conclusion of employment with the employer included as a party to the agreement.”
• Scope of the ban. The Bill would prospectively ban and render void any non-competes entered into or modified after the effective date.  It would not, unlike the 2023 bill that was ambiguous on this point, affect existing non-competes.  Like its predecessor, the Bill would make it a violation to “seek, require, demand or accept” a non-compete, not just to try to enforce it.  In one respect, the Bill’s ban is broader than its predecessor—it is not limited to the employment context but applies also (unless an exception applies) to shareholders in a corporation or non-profit corporation, members of an LLC and partners in a partnership.
• Sale-of-business exception. The Bill would not prohibit non-competes “in the sale of the goodwill of a business or the sale or disposition of a majority of an ownership interest in a business by a partner of a partnership, a member of an [LLC], or an entity.”  However, to be subject to a non-compete, a person or entity must own at least 15% of the business being sold.   
• Other restrictive covenants not banned. Like its predecessor, the Bill would not prohibit agreements that:
  • establish a fixed term of service and/or exclusivity during employment;
  • prohibit disclosure of trade secrets or confidential and proprietary client information; or
  • prohibit solicitation of an employer’s clients.
• Permitted Non-competes. The Bill states that even if a non-compete is not banned, it would be enforceable only if it satisfies New York’s common law test, meaning that it:
  • is reasonable in time, geography, and scope;
  • does not impose an undue hardship on the worker or harm the public; and
  • is no greater than necessary to protect the legitimate business interests of the employer.

The Bill goes further, however.  It adds that non-competes that are “permissible or enforceable under this section” cannot be longer than one year and must provide for the payment of salary during the restricted period.  The Bill does not expressly exempt from these limitations covered individuals who are partners or members selling their interests in a business; it is possible that these limitations therefore apply in those contexts. 

• Remedies for non-compliance. Like its predecessor, the Bill provides an aggrieved individual with a private right of action in court to void the non-compete.  Available relief includes injunctive relief, lost compensation, compensatory damages, liquidated damages of up to $10,000, and reasonable attorneys’ fees and costs, among other potential remedies.  Notably, the Bill provides that courts “shall award liquidated damages” to an aggrieved individual.
• Statute of limitations. Like its predecessor, the Bill has a variable statute of limitations that runs two years from the later of (i) when the non-compete is signed, (ii) when the individual “learns of” the non-compete, (iii) when the employment or contractual relationship is terminated, or (iv) when the employer “takes any step to enforce” the non-compete.

• Notice requirement. If the Bill becomes law, employers will have 180 days to post notices prepared by the Department of Labor to inform employees of the non-compete ban and of their rights under the law.

If the Bill passes in the Assembly, Governor Hochul will have 10 days to sign it into law or veto it.  We will continue to monitor.