Gov. Kathy Hochul plans to veto a bill that would have banned the use of noncompete agreements in New York after a furious lobbying effort by Wall Street and other powerful industries that forcefully opposed the measure, according to two people with knowledge of the negotiations over the bill. Ms. Hochul was expected to veto the bill later on Friday.
Democrats in control of the State Legislature passed the bill in June, wanting New York to join other states that have cracked down on the use of noncompete agreements, which companies use to bar employees from working for a competitor for a set amount of time after leaving a job.
The bill’s supporters argued that the agreements have unfairly trapped an array of workers, from hairstylists to engineers and doctors, who sign away their right to leave for a competitor.
But Ms. Hochul, a fellow Democrat, believed the ban went too far, and she attempted to narrow its scope so that it applied only to lower wage workers. The ban was opposed by high-powered banks and other large corporations that heavily rely on noncompete agreements to prevent top employees — from high-level executives to bankers and brokers — from taking clients and intellectual property with them to a competitor.
As the year-end deadline to act on the bill drew closer, Ms. Hochul sought to negotiate amendments this week that would appease both business groups and Democratic state lawmakers. Negotiations broke down on Friday, according to the two people, who were not authorized to discuss the veto publicly before the governor’s official announcement. Among other things, it appeared that the sides could not agree on how to calculate an income threshold that would have kept the ban for low-wage workers but would have allowed the agreements to persist for well-paid workers like those in the financial services industry.
Mike Murphy, a spokesman for the Andrea Stewart-Cousins, the State Senate majority leader, said Senate Democrats were “disappointed.”
Noncompete agreements have proliferated throughout the economy in recent years: Between 18 percent to 45 percent of workers in the private sector may be bound by them, according to surveys. Critics argue that the restrictive clauses prevent the free movement of labor and place an unfair burden on a constellation of workers, especially those who work low-wage, low-skilled jobs.
Governments have responded in kind. About half the nation’s states have imposed sharp limits on noncompete clauses, and some states, like Minnesota and California, have banned them altogether. Under President Biden, the Federal Trade Commission is exploring a national ban on companies requiring workers to sign the agreements.
The legislation to ban noncompete agreements in New York flew largely under the radar when Democratic lawmakers passed it at the end of the legislative session last summer, spearheaded by State Senator Sean Ryan of Buffalo and Assemblywoman Latoya Joyner of the Bronx.
But as its potential impact on New York City’s financial industry became clear, the state’s most powerful business groups quickly mobilized to oppose it. Among them were the Business Council and the Partnership for New York City, which represents big-name banks and investment firms such as Goldman Sachs and JPMorgan Chase & Co.
Warning of the potentially dire effects the ban would have on a company’s ability to retain top employees in one of the most important financial capitals of the world, the groups used their money and clout to lobby the governor, pushing her to water down the bill to ensure it would not apply to the highest-earning workers.
Lawmakers met with the governor’s office several times this week to haggle over potential changes and carve-outs. The governor’s team initially pushed to ban the agreements for workers making under $250,000 a year, while Senate Democrats first insisted on a threshold as high as $500,000 before bringing it down to $300,000, according to two people with knowledge of the negotiations.
The parties appeared unable to hash out their differences over minutiae such as how bonuses and stock options, both of which can make up a large portion of an employee’s compensation on Wall Street, should be counted.
Ms. Hochul has yet to take action on several other bills that lawmakers passed earlier this year.
It was still unclear if the governor would sign a wide-reaching environmental measure that aims to rein in state spending on products that contribute to deforestation. Also in limbo was a transparency bill that would require limited liability companies to disclose their owners, information that would have become public in a searchable database.
Late on Friday, Ms. Hochul did sign a measure that will move most county and town elections to even years, which she said would boost turnout and save taxpayer dollars. The legislation was celebrated by Democrats, who tend to do better in elections where turnout is higher. Republicans and some in county government opposed the measure, on the grounds that the move could cause local issues to be drowned out by national ones.