New York Senate Passes Bill that Would Prohibit Most Non-Compete Agreements

On June 9, 2025, the New York Senate passed Senate Bill S4641, which, if enacted, would amend New York labor law to prospectively prohibit most non-compete agreements. The bill defines "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," and "covered individuals" are those other than highly compensated individuals "who, whether or not employed under a contract of employment, perform[] or ha[ve] 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." The non-compete prohibition would apply to any individual that is and has been, for at least thirty days immediately preceding the covered individual's cessation of employment, a resident of New York or employed in New York, including individuals who work remotely in another state but who report to a New York-based worksite, office, or supervisor.

Exempted from S4641's ban on non-compete agreements are non-compete agreements with "highly compensated individuals," other than health-related professionals, that are reasonable in time, geography and scope and otherwise enforceable under New York law. The Bill defines highly compensated individuals as those compensated at an average annualized rate of cash compensation equivalent to or greater than $500,000 per year. Also exempted are certain non-competes related to a sale of business. The Bill provides that any non-compete agreement that is permissible or enforceable under the new Bill may 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 agreement.

The Bill states that it should not be construed as limiting otherwise legal agreements that (a) establish a fixed term of service and/or exclusivity during employment; (b) prohibit disclosure of trade secrets; (c) prohibit disclosure of confidential and proprietary client information; or (d) prohibit solicitation of clients of the employer. Finally, the Bill tasks every employer with posting conspicuous notice informing their employees of their protections and rights under the Bill.

Having passed the Senate, the Bill is now with the Assembly Labor Committee. If it is approved by the Labor Committee, it will go to the full Assembly for a vote. Governor Hochul has not hinted at whether she would sign or veto the Bill, as she did with a broader ban on non-competes in 2023. The narrower S4641 may fare better, as it appears to address Governor Hochul's concern about the "one-size-fits-all approach" of the prior bill, which had no carveouts for high earning individuals.