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The governor wanted to allow employers to use the agreements with high-paid workers, but was unable to work out a compromise with state lawmakers.
Gov. Kathy Hochul vetoed a bill on Friday 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.
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 had 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 two people with knowledge of the talks who were not authorized to discuss the private deliberations. 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.
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.
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