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Employers must prepare for changes to noncompete agreement laws

On Behalf of | Nov 3, 2023 | Employment Law for Employers |

For many New York businesses, the information that employees have access to can be a fundamental part of its success. To account for the risk of sensitive data, strategies and concepts from being used by other companies if an employee chooses to leave, many companies rely on noncompete agreements.

While these agreements are commonplace, there has been a movement afoot to narrow their scope or eliminate them entirely. Many employers are against this. The issue has come to the forefront with New York lawmakers passing a bill banning these agreements. It is still a question as to whether Gov. Kathy Hochul will sign it. Regardless, businesses need to prepare.

How the law might change the business landscape

Statistics from the Federal Trade Commission show that an estimated 20% of American employees have noncompete agreements. In the past, these were generally limited to executives. Increasingly, more workers are asked to sign them. This is viewed as limiting their upward mobility.

With the law having been passed, there is intense lobbying from businesses against it. Wall Street companies are among the most adamantly fighting its passage. They say their inside strategies are vulnerable if workers could leave and share them with competitors.

Those who support it say it would benefit workers whose noncompete agreements prevent them from getting jobs even after they have been terminated to laid off. One such case involved a man who engaged in a legal battle with his former employer to work in the same industry without needing to relocate.

Importantly, the ban would cover noncompete agreements after the law is passed. Until the governor signs it and makes it a law, companies can still ask employees to sign these agreements and they will remain in effect. Also, non-disclosure agreements will not be impacted by the law.

Businesses must be proactive as new legislation goes into effect

Adapting to changes is a key part of running a business and contracts with employees are no exception. It is currently uncertain as to whether this law will go into effect at all. Still, businesses need to know what steps they can take to protect their secrets if it does.

Given the way employee-employer relations are changing, it is always wise to be ready for every eventuality. That includes all issues from non-compete agreements, non-disclosure agreements, employee handbooks, compensation, severance, codes of conduct and more. Having assistance with employment law for employers is a critical part of being fully prepared.