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NY bans non-compete clauses. Will this help Florida?

It aint going to encourage more companies to stay in NY?

Another New York Gift to Florida

Albany moves to bar nearly all non-compete employee agreements.

By The Editorial Board

Nov. 21, 2023

As lousy as New York’s business climate is, it can get worse. Democrats in Albany are reminding businesses of this by passing legislation that would ban so-called non-compete agreements in employer contracts. Call it another gift to Florida.

Opposition to non-compete agreements has become a new cause celebre on the left. Businesses use these contractual restrictions to prevent employees from going to work for competing employers for a specified period after leaving a company. The agreements safeguard a company’s intellectual property and investment in worker development.

Such restrictions are especially common in finance and tech, where high-earning workers have knowledge about business strategies and trade secrets. You could understand why, say, Amazon wouldn’t want its cloud-computing engineers quitting to take their know-how to Microsoft or Google.

But progressives claim the agreements suppress worker pay and limit labor-market competition—even as they complain that bankers and tech bros make too much money and need to be taxed more.

The Federal Trade Commission has proposed banning non-compete agreements, but its rule would be unlikely to survive legal challenges because Congress never gave the agency authority to do so. Some states have recently passed or are considering legislation that would bar non-compete agreements from being applied to lower-paid workers.

Legislation passed by Democrats in Albany that is headed to Gov. Kathy Hochul’s desk is more sweeping than the FTC proposal. It would outlaw non-compete agreements statewide with few exceptions. It also creates a private right of action siccing plaintiff attorneys on businesses. This might buy another yacht for plaintiff attorneys, but it would hurt most workers.

Two-thirds of businesses surveyed by the U.S. Chamber of Commerce said a non-compete ban would hurt their talent or compensation strategy. Employers claimed they would respond by cutting compensation and reducing the sensitive information they share with employees.

Democrats in Albany claim non-compete agreements have a “negative effect on the labor market and economy of New York State” and “detrimental impact on consumers.”

Sorry, non-compete agreements aren’t why unemployment in New York City is 5.4%—more than three times higher than in Miami. Nor why nearly 160 Wall Street firms with nearly $1 trillion in assets have moved their headquarters out of the state since the end of 2019. Nor why New York state and local tax revenue for the first seven months of this fiscal year is running $9 billion lower than last year.

The legislation is one more reason for firms to move employees to other states. Mayor Eric Adams and Gov. Hochul can’t afford to lose more high earners. The top 2% of taxpayers in New York City pay about half of the city’s income tax. The state and city are facing large budget deficits, and not merely because of the cost of housing foreign migrants.

New York’s bigger problem is that its rich are migrating to other states, and progressives don’t seem to care.

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