New York and New Jersey Lawmakers Propose Major Restrictions on Non-Compete and Employment Agreements

Spire-Law-NY
Mar 28
3 min read

This article is from The National Law Review: https://ow.ly/RWCk50ViuK2 Employers in New York and New Jersey should be paying close attention to two newly proposed bills that could significantly limit the use of restrictive covenants in employment agreements. Aimed at curbing the reach of non-compete clauses, non-disclosure provisions, and waivers of legal rights, these legislative efforts reflect a broader trend across the country to enhance worker mobility and protect employee rights.

New York Senate Bill S4641: A Renewed Effort to Limit Non-Competes

On February 10, 2025, the New York Senate introduced Bill S4641, a fresh attempt to restrict non-compete agreements following Governor Kathy Hochul’s 2023 veto of a previous bill. If enacted, S4641 would add Section 191-d to the New York Labor Law, and:

🚫 Ban Non-Compete Agreements for Most Workers

The bill prohibits non-compete agreements for “covered individuals”—anyone performing services for another person in a position of economic dependence, except for “highly compensated individuals” (earning $500,000 or more annually).
Importantly, even high-earning health care professionals would be banned from entering post-employment non-competes, regardless of their income level.

✅ Permitted Agreements

While banning broad non-competes, the bill would still allow certain types of agreements, including:

Fixed-term employment or exclusivity during employment
Confidentiality, trade secret, and proprietary client information clauses
Non-solicitation of clients
Non-competes in business sales or ownership transfers, so long as they meet standard legal tests of reasonableness (time, geography, legitimate interest)

⚖️ Private Right of Action

Employees subject to unlawful non-competes could sue their employer, and courts could:

Void the agreement
Award liquidated damages up to $10,000
Order lost wages, compensatory damages, attorneys’ fees, and injunctive relief

New Jersey Senate Bill S1688: Expanding Worker Protections Under NJLAD

In New Jersey, lawmakers are targeting waivers of employee rights in employment contracts, including in collective bargaining agreements.

Senate Bill S1688, currently under review by the Senate Labor Committee, would amend the New Jersey Law Against Discrimination (NJLAD) to:

🚫 Prohibit Certain Waivers

Ban contractual waivers of employee rights to raise discrimination, harassment, or retaliation claims
Apply this prohibition not only to individual agreements but also to collective bargaining agreements, removing the current carve-out

🛡️ Limit Confidentiality and Non-Disparagement Provisions

Restrict NDAs and non-disparagement clauses that could be interpreted as limiting an employee’s ability to speak up or seek legal recourse for unlawful workplace conduct

This bill builds on existing NJLAD protections and would further align New Jersey with states pushing back on overbroad contractual restrictions.

What Employers Should Do Now

Although neither bill is currently law, employers should begin preparing:

Audit current employment agreements to identify any non-compete, non-disclosure, non-solicitation, or waiver provisions that may need to be revised if the laws are passed.
Monitor legislative developments in both states—especially if you employ remote or hybrid workers across jurisdictions.
Evaluate whether your current restrictive covenants serve a legitimate business interest and would be considered reasonable under evolving legal standards.
Consult employment counsel before issuing or enforcing any agreements that include restrictive covenants or waivers.

Final Thoughts

The introduction of New York Senate Bill S4641 and New Jersey Senate Bill S1688 signals a continued legislative push to rein in restrictive employment agreements and protect employee rights. While these bills have yet to be enacted, their progress should be closely tracked by employers seeking to stay compliant and avoid litigation.