A new bill introduced in the U.S. Senate aims to prohibit enforcement of most noncompete agreements in employment. In February, Senators Chris Murphy and Todd Young introduced the Workforce Mobility Act of 2023.
The bill is similar to previous versions introduced in 2019 and 2021 and has also been sponsored by Representatives Scott Peters, Mike Gallagher, and Anna G. Eshoo, as well as Senators Tim Kaine and Kevin Cramer.
If passed, the bill would generally ban the use of noncompete agreements by employers, with only two exceptions: the sale of a business’s goodwill or an ownership interest in a business, and the dissolution or disassociation of a partnership.
Congressional interest in a noncompete ban follows the U.S. Federal Trade Commission’s finding that noncompete agreements constitute an unfair method of competition, thus violating Section 5 of the Federal Trade Commission Act. The FTC is seeking public comment on its proposed ban on noncompete agreements.
The Workforce Mobility Act defines a “noncompete agreement” as an agreement that restricts an individual, after their employment or contractual relationship with a person or business ends, from performing work for another person for a specified period of time, in a specified geographical area, or in work that is similar to their previous work.
The bill would not affect nondisclosure agreements that prevent employees from disclosing an employer’s trade secrets, even after their employment ends.
The bill would give enforcement authority to the Federal Trade Commission and the U.S. Department of Labor, and employees would have a private right of action to bring enforcement actions against their employers. Employees with successful claims would be entitled to recover actual damages and attorneys’ fees. The bill also makes pre-dispute arbitration agreements and pre-dispute joint-action waivers unenforceable for claims arising under the Workforce Mobility Act.
Employees should not yet rejoice being relieved of the burden on noncompete agreements. The FTC must still finalize its rulemaking, and congress must approve its bill for executive signature. Many states, however, have moved forward with their own actions, and courts in some jurisdictions have limited enforcement of broadly written agreements.
If you are currently subject to a noncompete agreement, or if you’re planning an employment transition or have been accused of breaching an agreement, contact Potomac Legal Group for counsel.