Wall Street Is Fighting New York’s Ban on Non-Compete Agreements (Bloomberg)
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(Bloomberg) -- Last month, New York lawmakers approved one of the nation’s toughest bans on non-compete agreements. While the measure awaits Governor Kathy Hochul’s signature, lobbying groups from the finance industry and other business associations have gone to work pushing for exceptions.
The fight in New York comes as the Biden administration is working for a national plan to eliminate the contracts, which prohibit workers from going to a competing firm within a prescribed period of time. Businesses argue they protect intellectual property, trade secrets and costly investments in staff. Opponents say the forced time out hinders workers’ career progression and curbs how much they could earn.
An estimated 44% of New York’s workplaces subject employees to non-compete agreements, according to the legislation’s sponsor, Senator Sean Ryan, a Democrat from Erie County. And they’re particularly prominent among financial firms such as hedge funds, where prohibitions on employees moving to a new gig can run as long as two years.
The Business Council of New York State and Partnership for New York City are seeking amendments to the bill, which would go further than similar efforts in many other states. The groups represent hundreds of firms including banks, private equity firms, law firms, retail giants and telecom companies. The Securities Industry and Financial Markets Association is supporting the groups’ efforts.
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Not all business groups are opposed to a ban.
New York’s tech industry, which accounted for 28% of the city’s overall economic output in 2021, according to Tech:NYC’s latest report, is in favor of prohibiting non-compete contracts to help stimulate the startup sector. One 2020 study on non-compete contracts and the careers of high-tech workers shows a ban could increase employee mobility by 11% and boost new hire wages by 4%.
California, home to startup mecca Silicon Valley, has long outlawed the agreements — a move seen to be largely responsible for the state’s flourishing entrepreneurial culture that’s given rise to Apple Inc., Uber Technologies Inc. and Alphabet Inc.’s Google.
“We’ve wanted to create an ecosystem where employees can go and get trained at large employers and have the resources to take what they learned to spin off smaller companies,” said Julie Samuels, president and executive director of Tech:NYC, an industry group. “That’s how you create a really robust ecosystem.”
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