Non-compete agreements have had a rough 2023, most recently with President Biden specifically calling them out on Tuesday evening during his State of the Union and emphasizing his Administration’s opposition to them.  This, of course, is on the heels of the FTC’s recently announced proposed rule banning most non-compete agreements, as we recently reported.

Congress now is also in on the action to ban non-compete agreements. Last week, a bi-partisan group of legislators reintroduced the Workforce Mobility Act (the “Act”) which seeks to ban non-compete agreements with limited exceptions. The Act is similar to the FTC’s proposed rule but does have key differences.

The Act, which refers to non-compete agreements as “blunt instruments that crudely protect employer’s interests”, defines a non-compete agreement as:

an agreement, entered into after the date of enactment of this Act between a person and an individual performing work for the person that restricts such individual, after the working relationship between the person and individual terminates, from performing—

(A) any work for another person for a specified period of time;

(B) any work in a specified geographical area; or

(C) any work for another person that is similar to such individual’s work for the person that is a party to such agreement.

Any agreements that meet the above definition will have “no force or effect” except for specific instances involving (1) the sale of goodwill or ownership interests in a business, including certain severance agreements for Senior Executives, or (2) partnership dissolutions or disassociations. Otherwise, any non-compete agreements will be unenforceable—and even expose employers to potential liability for attempting to enter into any such agreements.

Other key takeaways from the proposed Act include:

• Under its language, the Act should only apply prospectively. As such, non-compete agreements already entered into could survive potential enactment of the Act.

  • If the Act becomes law and the FTC’s proposed rule is implemented, there will be a conflict concerning the enforceability of existing non-competes – under the FTC’s proposed rule, existing non-competes would need to be rescinded within 180 days after publication of the final rule. 

  • An additional conflict between the Act and the FTC’s proposed rule concerns enforceability of non-competes for Senior Executives and high earners. While the Act would exempt Senior Executives who sign particular severance agreements, the FTC’s proposed rule does not contain that exemption.

  • The Act would not ban non-solicitation agreements and even promotes the use of non-disclosure agreements covering trade secrets as reasonable alternatives to protect competitive information.

  • The Act would require the Federal Trade Commission (“FTC”) and Department of Labor (“DOL”) to assist with enforcement of the Act which would be tricky if the FTC’s proposed rule is implemented, as it differs in ways from the proposed Act.

  • The Act would allow for a private right of action for “an individual who is aggrieved by a violation.” If successful, such individual would be entitled to actual damages and reasonable costs and attorney fees.

The reintroduction of the Workforce Mobility Act, and the national trend against non-compete agreements reinforces the need for employers to safeguard their competitive information with other measures. Just last month we provided guidance on best practices that can be implemented by employers to ensure their information is protected.