Healthcare non-compete ban would expand mobility

Summary#

S-10722, titled “Prohibits healthcare non-compete agreements and certain restrictive covenants,” would amend New York’s Labor Law by adding rules for healthcare non-compete agreements and a required employee notice. Its stated goal is to protect covered healthcare workers from agreements that restrict where they can work after leaving an employer. The bill is introduced and is not law.

  • Employers and their agents could not seek, require, demand, or accept a covered healthcare worker’s agreement restricting the worker from getting another job after employment ends. Agreements made or changed on or after the bill’s effective date would be void and unenforceable.
  • Covered workers are people with one of the listed professional licenses who perform work or services while economically dependent on, and required to perform duties for, another person. The list includes physicians, nurses, dentists, pharmacists, physical therapists, psychologists, and other specified licensed professionals.
  • A covered worker could sue an employer or other person alleged to have violated the ban. A court could void an agreement and order remedies, including an injunction, lost compensation, damages, legal fees, and liquidated damages of up to $10,000 per affected worker. The bill says the court must award liquidated damages, but does not set a specific amount.
  • The bill preserves certain agreements, including fixed-term or exclusivity agreements during employment, protections for trade secrets and confidential client information, and client non-solicitation agreements—so long as they do not otherwise restrict competition. It also has an exception for certain business sales involving owners with at least a 15% interest.
  • Any non-compete agreement that remains allowed must meet New York common-law tests, last no more than one year, and provide salary during enforcement. The state Department of Labor must develop a notice; employers must post it in specified workplace locations.

What it means for you#

  • Covered healthcare workers: If the bill became law, a covered worker could take another job after leaving an employer without being bound by a prohibited non-compete entered into or changed after the effective date. The bill does not retroactively apply to unchanged existing contracts.
  • Workers and employers: The bill does not ban the listed protections for trade secrets, confidential client information, or client solicitation when they do not otherwise restrict competition. Some restrictions connected to qualifying business sales may also remain possible.
  • Covered workers bringing a claim: A worker would have two years from the latest of the agreement’s signing, learning of it, ending the work relationship, or the employer taking a step to enforce it to sue.
  • Employers: They would have to stop seeking or accepting prohibited agreements and post the Department of Labor’s notice. A worker who lives or works in New York under the bill’s stated 30-day condition could not be made to avoid the law through a choice-of-law or choice-of-venue term.
  • Other healthcare workers and the public: The bill’s coverage depends on the listed licenses and the worker’s relationship with the other person. It does not directly create a healthcare service or change who is eligible to receive care.

Money#

No cost estimate is provided in the available material.

  • Employers could have to pay salary during enforcement of a non-compete that remains allowed under the bill.
  • Employers found to have violated the bill could face damages, legal fees, and liquidated damages of up to $10,000 per affected worker.
  • The Department of Labor would have to prepare and publish a notice. The bill provides no staffing or cost estimate.

What is unclear#

  • The supplied material does not include the current Labor Law provisions, so I could not verify how the bill would change existing New York protections.
  • “Economic dependence” and when an agreement “otherwise” restricts competition are not defined in the bill.
  • The bill does not explain how the Department of Labor would enforce the rules, or whether it would investigate complaints. It does authorize workers to sue.
  • The bill does not specify how a court should set liquidated damages below the $10,000 limit.
  • The effective date would be 30 days after the bill becomes law; the notice requirement would start after 180 days. The bill’s passage is uncertain.

Case for#

  • The bill appears intended to let specified healthcare professionals change employers without a contract blocking them from obtaining another job.
  • A worker could seek a court order and financial remedies if an employer tried to use a prohibited agreement.
  • The bill preserves protections for confidential information and client relationships when those terms do not restrict competition.

Case against#

  • One concern is that employers would have less ability to use non-compete agreements to protect legitimate business interests, even though the bill retains some other protections.
  • Employers could face salary payments and legal costs when enforcing agreements that remain permitted, as well as damages if a court finds a violation.
  • The bill’s coverage and limits may be difficult to apply in some cases because terms such as “economic dependence” and restrictions that “otherwise” limit competition are not defined.