Hochul plans to veto non-compete agreements in New York

Gov. Kathy Hochul plans to veto a bill that would have banned the use of non-compete agreements in New York after angry lobbying efforts by Wall Street and other powerful industries that strongly opposed the measure, according to two people familiar with 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 the use of non-compete agreements, which companies use to prevent employees from working for a competitor for a set period of time after leaving. a job.

Supporters of the bill say the agreements have unfairly trapped a group of workers, including hairdressers, engineers and doctors, who give up their right to leave to a competing company.

But Ms. Hochul, a fellow Democrat, thought the ban went too far and tried to narrow its scope so that it applied only to low-wage workers. It has opposed high-powered banks and other large corporations that rely heavily on noncompete agreements to prevent senior employees — from high-level executives to bankers and brokers — from taking customers and intellectual property with them to a competitor.

With a year-end deadline for work on the bill looming, Ms. Hochul sought to negotiate amendments this week that would appease business groups and Democratic state lawmakers. Negotiations broke down on Friday, according to the two people, who were not authorized to discuss the veto publicly before the governor's formal announcement. Among other things, the two sides appeared unable to agree on how to calculate an income limit that would have kept the ban in place for low-wage workers but would have allowed the agreements to continue for well-paid workers such as those in the financial services industry. .

In response to a request for comment, a spokesman for Ms. Hochul said only that the governor was still reviewing the legislation. Mike Murphy, a spokesman for Andrea Stewart-Cousins, the state Senate Majority Leader, said Senate Democrats were “disappointed.”

Non-compete agreements have spread throughout the economy in recent years: among 18 percent And 45 percent It may be adhered to by workers in the private sector, according to surveys. Critics argue that the restrictive provisions prevent the free movement of labor and place an unfair burden on a constellation of workers, especially those in low-wage, low-skill jobs.

Governments have responded in kind. About half of US states have imposed strict restrictions on non-compete clauses, and some states, such as Minnesota and California, have banned them altogether. Under President Biden, the Federal Trade Commission is exploring a national ban on companies requiring workers to sign agreements.

The legislation banning non-compete agreements in New York, which was led by State Sen. Sean Ryan of Buffalo and Assemblywoman LaToya Joyner of the Bronx, had largely flown under the radar when Democratic lawmakers passed it at the end of the legislative session this summer.

But as its potential impact on New York City's financial industry became clear, the state's most powerful business groups were quick to mobilize to oppose it. Among them were the Business Council and the New York City Partnership, which represents big-name banks and investment firms such as Goldman Sachs and JPMorgan Chase & Company.

Warning of the dire effects the ban could have on a company's ability to retain senior employees in one of the world's most important financial capitals, the groups used their money and influence to pressure the governor, pushing her to water down the bill to ensure it would not apply to higher-income workers.

Lawmakers have met with the governor's office several times this week to negotiate potential changes and exceptions. The governor's team initially pushed to ban agreements for workers making less than $250,000 a year, while Senate Democrats first insisted on a threshold of up to $500,000 before lowering it to $300,000, according to two people familiar with the negotiations.

The two sides appeared unable to resolve their differences over fine details such as how bonuses and stock options are calculated, both of which can make up a significant portion of an employee's compensation on Wall Street.

Ms. Hochul has yet to take action on several other bills passed by lawmakers this year.

It remains unclear whether the governor will sign a broad environmental measure aimed at curbing state spending on products that contribute to deforestation. Also in limbo was a transparency bill, which would require limited liability companies to disclose their owners, information that would become public in a searchable database.

Late Friday, Ms. Hochul signed a measure that would delay most county and town elections to even years, which she said would boost turnout and save taxpayer money. The legislation was celebrated by Democrats, who tend to do better in elections with higher turnout. Republicans and some members of county government opposed the measure, on the grounds that the move could cause local issues to be drowned out by national issues.

Grace Ashford Contributed to reports.