Gov. Kathy Hochul plans to veto a bill that would have banned the use of non-compete agreements in New York after Wall Street and other powerful industries lobbied heavily against the measure, according to two people with knowledge of negotiations on the bill. Ms. Hochul was expected to veto the bill later on Friday.
Democrats who control the state Legislature passed the bill in June, wanting New York to join other states that have cracked down on non-compete clauses that allow companies to restrict employees from working for a certain period of time after they leave Competitors prohibit a profession.
Proponents of the bill argued that the agreements unfairly trap a range of workers, from hairdressers to engineers and doctors, by giving up their right to go to a competitor.
But Ms. Hochul, a Democrat, believed the ban went too far and sought to narrow its scope so that it applied only to low-income earners. The ban was opposed by powerful banks and other major corporations that rely heavily on non-compete agreements to prevent top employees – from high-level executives to bankers and brokers – from taking customers and intellectual property to a competitor.
As the year-end deadline for implementing the bill approaches, Ms. Hochul tried this week to negotiate amendments that would satisfy both business groups and Democratic state lawmakers. Negotiations broke down Friday, said the two people, who were not authorized to publicly discuss the veto before the governor's official announcement. Among other things, it emerged that the sides were unable to agree on calculating an income limit that would have maintained the ban for low-wage workers but would have allowed the agreements to continue for well-paid workers, such as those in the financial services industry.
Mike Murphy, a spokesman for state Senate Majority Leader Andrea Stewart-Cousins, said Senate Democrats are “disappointed.”
Non-compete agreements have proliferated across the economy in recent years: surveys suggest that between 18 and 45 percent of private sector workers may be bound by them. Critics argue that the restrictive clauses hinder the free movement of labor and place an unfair burden on a constellation of workers, particularly those in low-paying and low-skilled jobs.
Governments have responded in kind. Approximately half of U.S. states have severely restricted non-compete agreements, and some states, such as Minnesota and California, have even banned them entirely. Under President Biden, the Federal Trade Commission is considering a nationwide ban on companies requiring their workers to sign the agreements.
New York's non-compete law largely flew under the radar when Democratic lawmakers passed it at the end of the legislative session last summer, led by state Sen. Sean Ryan of Buffalo and Rep. Latoya Joyner of the Bronx.
But as the potential impact on New York's financial industry became clear, the state's most powerful business groups quickly mobilized to fight back. Among them were the Business Council and the Partnership for New York City, which represents well-known banks and investment firms such as Goldman Sachs and JPMorgan Chase & Co.
Warning of the potentially devastating impact the ban would have on a company's ability to retain top employees in one of the world's major financial capitals, the groups used their money and influence to lobby the governor and her to urge the bill to be weakened to ensure it does not apply to the highest-earning workers.
Lawmakers met with the governor's office several times this week to negotiate possible changes and carve-outs. The governor's team initially pushed to ban the agreements for workers making less than $250,000 a year, while Senate Democrats initially insisted on a threshold of up to $500,000 before raising it to $300,000 dollar, according to two people familiar with the negotiations.
The parties appeared unable to resolve their differences over trivial matters, such as how bonuses and stock options, both of which can make up a large portion of a Wall Street employee's compensation, should be counted.
Ms. Hochul has yet to take action on several other bills the Legislature passed earlier this year.
It was still unclear whether the governor would sign a sweeping environmental measure aimed at curbing government spending on products that contribute to deforestation. Also pending was a transparency law that would require limited liability companies to disclose their owners, information that would have become public in a searchable database.
Late Friday, Ms. Hochul actually signed a measure moving most county and city elections to even years, which she said would increase voter turnout and save taxpayer money. The law was celebrated by Democrats, who tend to do better in elections with higher voter turnout. Republicans and some in county government opposed the measure, saying the move could result in local problems being drowned out by national ones.