Yet Another Federal Effort to Ban Most Non-Compete Agreements

A bipartisan group of U.S. Senators recently re-introduced a bill, which they have named the “Workforce Mobility Act of 2023,” to largely ban the use of employer non-compete agreements throughout the country as a matter of federal law. As previously noted, the Federal Trade Commission (“FTC”) recently proposed a rule that would make most non-compete agreements, as well as other agreements that are considered “de facto” non-competes, an unfair or deceptive trade practice under federal law.

This Act was previously introduced in 2019 and 2021 and was most recently reintroduced by Senators Christopher Murphy (D-Conn.) and Todd Young (R-Ind.). It is co-sponsored by Senators Tim Kaine (D-Va.) and Kevin Cramer (R-N.D.). If passed, the Act would codify the use of employment non-competes as an unfair trade practice under federal law. The Act provides that, with certain limited exceptions, “no person shall enter into, enforce, or attempt to enforce a non-compete agreement with any individual who is employed by, or performs work under contract with, such person with respect to activities of such person in or affecting commerce,” and that noncompete agreements will have no force or effect.” Under the Act’s definitions, a “noncompete agreement,” means an agreement entered into after the date of the enactment of the Act between a person and an individual performing work for the person that restricts such individual, after the working relationship between the person and the individual terminates, from performing:

  • Any work for another person for a specified period of time;
  • Any work in a specified geographic area; or
  • Any work for another person that is similar to such individual’s work for the person that is a party to such agreement.

Limited exceptions to the ban permit non-competes under specified conditions, including in connection with the sale of certain interests in a business or the dissolution of, or disassociate from, partnerships.

Finally, the Act would authorize the FTC, the federal Department of Labor, state attorneys general, and even individual employees to bring actions against employers who violate the Act to seek penalties, damages, injunctions, and other relief. Claims under the Act would be exempted from arbitration and joint-action waivers, including waivers of joint, class, and collective actions.

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