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Client Alert: NY Governor Vetoes Non-Compete Bill and Other 2023 Year-End Updates for NY Employers

Date: December 28, 2023
  1. New York Governor Vetoes Non-Compete Bill!
On December 22, 2023, New York Governor Kathy Hochul gave a holiday gift to New York’s business community when she vetoed New York State Senate bill (S.3100A)—New York’s non-compete bill—that would have prohibited employers in New York from using non-compete agreements and certain other restrictive covenants with employees and other “covered individuals,” amending New York’s Labor Law. The business community lobbied for the Governor to veto or narrow the bill, fearing that the non-compete bill, in the form passed by the New York legislature, would damage New York’s economy, threatening innovation and causing businesses to flee New York for more employer-friendly states.

The Governor’s veto was a surprise to some, following Governor Hochul’s announcement in 2022 that she would propose legislation to ban non-compete agreements for workers making below the median wage in New York State and ban all ‘no-poach’ agreements under New York State antitrust law. Some thought that the Governor might seek a chapter amendment to negotiate changes to S.3100A, but that did not happen. See Whiteford’s Employment Law Update entitled “The Latest on Non-Compete Agreements.”

Now, it is back to the drawing board for New York legislators if they wish to sponsor a new, narrower non-compete bill and try to persuade the Governor to sign it into law in 2024. As noted previously, regardless of New York’s actions concerning non-competes, there is a movement afoot at the national level to ban the use of non-compete agreements by U.S. employers, though the business community may challenge the jurisdiction of the FTC and the NLRB to ban non-compete agreements.

The Governor’s veto of S.3100A followed a flurry of bills she signed into law during the final quarter of 2023, which impacted New York employers. Among them are the following:
  1. Wage Theft is a Crime
September 6, 2023: Governor Hochul signed legislation (S.2832-A/A.154-A), amending New York’s Penal Law to make wage theft a crime of larceny. Although wage theft was already subject to penalties under New York’s Labor Law (“NYLL”), this amendment to NY’s Penal Law allows prosecutors to seek stronger penalties against employers who engage in wage theft. Section 155.00 of the Penal Law is amended to add a Section 10 which expands the definition of “property” to include: “compensation for labor or services.” Section 155.05, subdivision 2, as amended, states, in pertinent part: “(F) A person obtains property by wage theft when he or she hires a person to perform services and the person performs such services and the person does not pay wages, at the minimum wage rate and overtime, or promised wage, if greater than the minimum wage rate and overtime, to said person for work performed…” The law took effect immediately.
  1. Employers May Not Discipline Employees for Not Attending Meetings on Religious or Political Matters
September 6, 2023: Governor Hochul also signed legislation (S.4982/A.6604) prohibiting employers from disciplining employees for refusing to (i) attend an employer-sponsored meeting with the employer or its agent, representative or designee, the primary purpose of which is to communicate the employer's opinion concerning religious or political matters; or (ii) listen to speech or view communications, the primary purpose of which is to communicate the employer's opinion concerning religious or political matters. The law, which amends NYLL §201-d, took effect immediately. Employers must post a sign in their workplace at the location(s) where employee notices are normally posted to inform employees of their rights under this law.
  1. New York Prohibits Employers from Requesting Access to Applicant/Employee Social Media Accounts
September 14, 2023: Governor Hochul signed S.2518/A.836 into law, which amends NYLL to add a new Section 201-i, prohibiting employers from requesting or requiring username, login information, and passwords, of a job applicant’s or employee’s personal accounts as a condition of hiring, employment, or for use in a disciplinary action. The law takes effect on March 11, 2024.
  1. New York Requires Employers to Provide UI Information to Departing Employees
September 14, 2023: The Governor signed S.4878-A /A.398-A into law, amending NYLL Section 590, by adding subsection 2, which requires employers to give written notice to their employees that they are eligible to apply for unemployment insurance whenever the employer permanently or temporarily separates an employee from employment or reduces hours to a point that the employee would qualify for total or partial unemployment. The written notice must include the employer's name, registration number, and contact address. The law took effect on November 13, 2023.
  1. Increased Earnings Threshold for Certain Wage Payment Protections Under NYLL
September 15, 2023: Governor Hochul signed into law, Senate Bill S.5572, which amends NYLL Section 190’s definition of bona fide executive, administrative, or professional employees who are excluded from “clerical or other worker,” to those earning at least $1,300 per week (up from $900 per week). The law takes effect on March 13, 2024. The purpose of the amendment is to increase the threshold for applicability of wage payment protections for certain persons employed in a bona fide executive, administrative, or professional capacity, from $900 to $1,300 per week to permit those earning below $1,300 per week to bring wage theft claims to the NYS Department of Labor (as the DOL will not address claims of those earning below that amount).   
  1. NYS Pay Transparency Law
September 17, 2023: New York State’s Pay Transparency law took effect this date, amending NYLL Section 194-b. The law requires employers with four or more employees to include the minimum and maximum annual salary or hourly range for compensation in any advertisement for a job, promotion, and/or transfer opportunities that are to be physically performed, at least in part, in New York State. All postings for a job, promotion, or transfer opportunity must contain a job description, when available. The law also applies to any opportunities that are performed outside the state, including remote or telecommuting opportunities, that report to a supervisor, office, or other work site physically in New York State. The employer must believe in good faith that the pay ranges listed are accurate at the time of posting. Employers must also clearly state if a position is commission-based. The law also prohibits employers from retaliating against employees who discuss their compensation with coworkers. The New York State Department of Labor has the authority to enforce the law and has published an FAQ to aid employers and employees in answering questions about the law, and a Fact Sheet for employers (as well as one for employees). New York City also has its own Pay Transparency law. Unlike the New York City law, there is no private right of action for employees or applicants to file civil lawsuits against employers under New York State’s Pay Transparency law.
  1. Non-Disclosure Provisions in Settlement Agreements Law
November 17, 2023: Governor Hochul signed S.4516 into law, amending NY’s General Obligations Law § 5-336 (in relation to violations of nondisclosure agreements in certain settlement agreements). The law will alter how employers utilize non-disclosure and non-disparagement provisions in certain agreements settling discrimination, harassment, and retaliation claims. The law made three significant amendments:
  1. A complainant has up to 21 days to consider whether the term or condition of non-disclosure/confidentiality is the complainant’s preference (previously, the complainant could not sign the confidentiality preference before 21 days);
  2. Section 2 extends protections to independent contractors. It states, in pertinent part: “Notwithstanding any provision of law to the contrary, any provision in a contract or other agreement between an employer or an agent of an employer and any employee [or], potential employee, or independent contractor of that employer entered into on or after January 1, 2020, that prevents the disclosure of factual information related to any future claim of discrimination is void and unenforceable unless such provision notifies the employee [or], potential employee, or independent contractor that it does not prohibit [him or her] the complainant from speaking with law enforcement, the equal employment opportunity commission, the state division of human rights, the attorney general, a local commission on human rights, or an attorney retained by the employee or potential employee.”
  3. There is a new Section 3 which provides that: “Notwithstanding any other law to the contrary, no release of any claim, the factual foundation for which involves unlawful discrimination, including discriminatory harassment, or retaliation, shall be enforceable, if as part of the agreement resolving such claim: (a) the complainant is required to pay liquidated damages for violation of a nondisclosure clause or non-disparagement clause; (b) the complainant is required to forfeit all or part of the consideration for the agreement, for violation of a nondisclosure clause or non-disparagement clause; or (c) it contains or requires any affirmative statement, assertion, or disclaimer by the complainant that the complainant was not in fact subject to unlawful discrimination, including discriminatory harassment, or retaliation.” (emphasis added) The law took effect on November 17, 2023, and applies to agreements entered into on or after that date.
  1. NYS Follows NYC in Enacting the “Freelance Isn’t Free” Act Providing Payment Protections for Freelance Workers
November 21, 2023: Governor Hochul signed into law S.5026/A.6040, “Freelance Isn’t Free” law, which gives a private right of action to freelancers paid at least $800 for their services to sue in court to recover monies owed. The law gives freelancers a right to a written contract with certain terms, timely and full payment, and protection from retaliation and discrimination for exercising these rights. The New York State Attorney General can bring actions to obtain remedies, including damages and civil penalties. The New York State Department of Labor will provide model contracts on its website for freelancers and hiring parties to use. This law follows New York City’s (“NYC”) Freelance Isn’t Free Act enacted in 2017. Employers with freelancers working in New York City still need to remain mindful of NYC’s legal requirements. The law takes effect on May 20, 2024, and applies only to contracts entered into on or after that date.
 
         10. NYS Minimum Wage and Salary Thresholds for Exempt Employees Set to Increase January 1
  1. Minimum Wage: On January 1, 2024, New York state’s minimum wage will increase to:
  • $16 per hour in New York City, Westchester, and Long Island, and
  • $15 per hour for the rest of the state.
  • In 2025 and 2026, the minimum wage will increase by 50 cents, respectively. 
  • In 2027, the minimum wage will increase annually at a rate determined by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the Northeast Region.
  1. Salary Thresholds for Executive/Administrative Exemptions from Overtime Pay: Effective January 1st, the minimum salary thresholds for classifying an employee as “exempt” from NYLL’s overtime pay requirements under the executive and administrative exemptions will increase to:
$1,200 per week for employees working in New York City, Nassau, Suffolk, and Westchester Counties; and $1,124.20 per week for the remainder of New York state.

Employers may recall that, under NYLL, there is no salary requirement for the professional exemption although, under the federal Fair Labor Standards Act (“FLSA”), there is a $684 per week salary threshold for employees classified as exempt under the FLSA “professional” exemption. Remember too that employees must also meet certain duties tests to be considered exempt under wage/hour overtime pay laws. Employers must satisfy both federal and state labor law requirements for “exemptions” to classify an employee as “exempt” from overtime pay laws.

What Should Employers Do Now?
  • Review independent contractor agreements to ensure they comply with New York’s Freelance Isn’t Free Act—and with NYC’s law if contractors are working in New York City;
  • Review language of employee separation and settlement agreements with employees and independent contractors;
  • Review/audit your pay practices to ensure proper payment of minimum wage, overtime pay rates; and worker classification (exempt versus nonexempt); review salaries of those employees that are at or near the current salary threshold in New York for executive or administrative exempt employees; ensure manual workers are paid weekly (except non-profit employers may pay manual workers in New York twice a month).
  • Ensure your policies and agreements address the lawful circumstances under which you, as the employer, may request or require password access information to accounts and electronic communications devices used for business purposes;
  • Confer with your employment counsel on the above issues including any workers you plan to classify as “exempt” from overtime pay laws or as an independent contractor.
 
Whiteford’s Labor & Employment Law Group is continuing to monitor developments in this area and will provide updates as they develop. Please feel free to reach out to our department with any questions.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.