Despite a narrower approach than the prior version that the governor vetoed, the bill could have broad implications if enacted.
Following Governor Kathy Hochul’s highly-publicized veto of a non-compete ban in late-2023, the New York Legislature is once again considering a ban. Although the current iteration is more limited than its predecessor, the current proposal could still have a very broad reach.
Senate Bill S4641A passed the Senate in June 2025 and is currently making its way through the Assembly. If enacted, the bill would add a Section 191-d to the New York Labor Law and prohibit employers from seeking, requiring, demanding, or accepting “non-compete agreements” from "covered individuals” who earn less than a statutory threshold (initially set at $500,000 per year) and from “health-related professionals” regardless of their earnings.
The bill expressly states that it does not otherwise prohibit agreements for fixed terms, that require exclusivity during employment, that prohibit the disclosure of confidential and proprietary client information or trade secrets, and/or that prohibit the solicitation of an employer’s clients.
Key Definitions
Here are a few of the bill’s key definitions for ease of reference:
- A “non-compete agreement” is “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.”
- A “covered individual” is “any person other than a highly compensated individual who, whether or not employed under a contract of employment, performs or has performed work or services for another person on such terms and conditions that they are, in relation to that other person, in a position of economic dependence on, and under an obligation to perform duties for, that other person.”
- A “highly compensated individual” is “any individual who is compensated at an average annualized rate of cash compensation determined by the income listed on the individual’s three most recent W-2 statements and, where applicable, 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, equivalent to or greater than [$500,000] per year, provided that such compensation level shall be adjusted each calendar year, beginning in [2027], based on the increase, if any, in the Consumer Price Index for all Urban Consumers for New York state, with the base year of [2026].”
- A “health related professional” covers licensed physicians, physician assistants, chiropractors, dentists, perfusionists, veterinarians, physical therapists, pharmacists, nurses, podiatrists, optometrists, psychologists, occupational therapists, speech pathologists, and mental health practitioners licensed pursuant to various articles of the New York Education Law.
Exceptions
The bill does contain carve outs for “non-compete agreements or other similar covenants” in the contexts of business sales and the disposition of certain ownership interests. For starters, such agreements would be permitted in “the sale of the goodwill of a business.”
Such agreements also would be permitted in “the sale or disposition of a majority of an ownership interest in a business by a partner of a partnership, a member of a limited liability company, or an entity” provided that it applies to “any such partner of a partnership or member of a limited liability company owning at least a [15] percent interest in such partnership or limited liability company” or “any such person or entity owning [15] percent or more ownership in a business.”
The bill mandates that such non-competes “meet all requirements for determining enforceability under the common law of New York,” and, in doing so, adds that “[a] non-compete agreement that is reasonable in time...shall not contain a term of restriction greater than one year” and must “provide for the payment of salary during the period of enforcement of the non-compete.”
With respect to broadcast industry employees, the bill clarifies that it does not “amend, modify, impair, or otherwise affect the application of enforcement of” or “create any conflict or inconsistency with” New York Labor Law §202-k, which provides broadcast industry employees certain employment protections.
Notice Requirement
Employers would need to provide employees notice of their rights under the bill. The bill tasks the New York State Department of Labor with “developing a notice to inform employees of their protections and rights” and posting the notice on its website.
According to the bill, employers would be required to post the notice “conspicuously in easily accessible and well-lighted places customarily visited by employees and applicants for employment.”
Potentially Broad Implications
Despite a narrower approach than the prior version that the governor vetoed, the bill could have broad implications if enacted. According to the New York City comptroller, only 2.3 percent of New York City personal income tax filers in 2023 reported adjusted gross income of $500,000 per year or more. This data point indicates that a small percentage of individuals in New York would fall into the definition of “highly compensated individuals” who can enter into non-competes pursuant to the bill.
In addition, the bill’s reach may extend beyond New York. According to the bill, “[n]o choice of law provision or choice of venue provision that would have the effect of avoiding or limiting the requirements of this section shall be enforceable if the covered individual is and has been, for at least [30] days immediately preceding the covered individual’s cessation of employment, a resident of New York or employed in New York.”
The bill further explains that it would cover “individuals who work remotely in another state but who report to a New York worksite or office or who report to a New York-based supervisor.” If enacted, courts inevitably will have to wrestle with the enforceability of non-New York choice of law and venue language in restrictive covenant agreements.
Remedies
Beyond mere unenforceability of non-competes going forward, the bill introduces significant risk of legal exposure for employers. The bill provides a private right of action for violations that can be commenced within two years of a covered individual signing a non-compete, a covered individual learning of the non-compete, a covered individual’s contract or employment ending, or any action an employer takes to enforce the non-compete—whichever occurs last.
The bill further requires courts to award liquidated damages of up to $10,000 per affected individual, in addition to allowing for injunctive relief, lost compensation, and attorneys fees and costs.
Employers Should Plan Ahead
Most of the bill’s provisions currently are scheduled to take effect 30 days after becoming law and will only be applicable to contracts that are entered into or modified after that date. As a result, New York employers should consider auditing their restrictive covenant agreements (e.g., non-compete, non-disclosure, and non-solicitation provisions) now.
In light of the law’s prospective application, employers may want to review existing agreements and assess whether it make sense to seek revisions to such documents prior to the law’s effective date.
Looking ahead, employers also may wish to take certain proactive steps in the event the bill becomes law, such as:
Identifying the specific people and positions that will be affected by the bill (e.g., new hires or newly promoted employees into positions to which non-competes historically have applied);
Assessing whether (or not) it make sense to provide a pay increase that would render certain individuals “highly compensated individuals” for whom the bill presents more flexibility;
Preparing template agreements that eliminate problematic language (e.g., non-compete language that would be unenforceable under the bill) and leave or revise language providing protections that the law still allows (e.g., non-disclosure of confidential and proprietary client information and trade secrets and non-solicitation of clients); and
Establishing a process for ensuring compliant agreements are distributed to and signed by the correct people.
Reprinted with permission from the April 30, 2026 issue of New York Law Journal. © 2026 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.
