There is a long history of companies using non-compete clauses in certain types of employment agreements. Typically such agreements were used to protect key employees with special skills or knowledge of a company's trade secrets. In recent years, some New York employers have broadly expanded the use of non-compete agreements to cover many unskilled and semi-skilled workers.
AG Acts to Protect “Low-Wage” Workers
New York State officials have taken notice of this trend and reacted accordingly. In July of 2016, New York Attorney General Eric T. Schneiderman announced a settlement with a popular sandwich franchisor that allegedly required its restaurant and delivery workers to sign non-compete agreements. According to Schneiderman, for a period of two years after leaving one of the franchise's stores, these “low-wage workers” were barred from working at any other business that “made more than 10 percent of its revenue from sandwiches.”
More recently, a New York-based digital media company has come under fire for requiring its entry-level employees to sign non-compete agreements that bar them from working for a long list of specified media companies, to which the employer “reserves the right” to add names later. As with the sandwich franchiser mentioned above, this could spark a reaction from the Attorney General's office. In fact, Schneiderman did litigate and settle a separate claim last year against another media company that tried to hold the majority of its employees, including many workers fresh out of college, to non-compete agreements that could not be negotiated or waived.
Meanwhile, New York legislators may adopt a statutory ban on these kind of non-compete agreements. With the Attorney General's backing, a bill called the “New York State Mobility and Opportunity for Vulnerable Employees (MOVE) Act” is working its way through the state Senate. The MOVE Act would ban all “covenants not to compete” between employers and “low-wage employees,” which are defined as any hourly worker making less than $15 per hour, or any salaried employee earning less than $31,200 annually.
The MOVE Act would not ban non-compete agreements for other types of employees, but it would require employers to disclose the need for such restrictive covenants to potential employees at the start of the hiring process.
It is important to note the MOVE Act is still just a proposed bill. If passed by the Senate, it must still be approved by the state Assembly and signed into law by Gov. Andrew Cuomo.
Has a Non-Compete Agreement Hurt Your Employment Prospects?
Even without formal legislation, the Attorney General's recent actions demonstrate that it is possible to successfully challenge the enforcement of non-compete agreements, particularly where the employer cannot offer a significant business justification. While many employers do not enforce their non-compete agreements, those that do can cause significant harm to former employees who are just looking to move on with their lives. If you have been unfairly affected by a non-compete agreement and would like to speak with an experienced New York employment law attorney about your possible legal options, contact the Law Offices of Mahir S. Nisar today.