The U.S. Congress has joined a growing number of state legislatures and the Federal Trade Commission (FTC) in seeking to curtail—or altogether end—the use of noncompetition agreements in the employment context. On February 1, 2023, less than one month after the FTC issued a proposed rule on the topic, Senator Chris Murphy (D-CT) and Senator Todd Young (R-IN) introduced the Workforce Mobility Act of 2023, which, for the most part, would ban employers’ use of noncompete agreements. Representatives Scott Peters (D-CA), Mike Gallagher (R-WI), and Anna G. Eshoo (D-CA) introduced the legislation in the U.S. House of Representatives. The bill is also cosponsored by Senator Tim Kaine (D-VA) and Senator Kevin Cramer (R-ND). Previous versions of the bill were introduced in 2019 and 2021.
What the Bill Would Prohibit
Subject to narrow exceptions, the Workforce Mobility Act would provide that “no person shall enter into, enforce, or attempt to enforce a noncompete agreement with any individual who is employed by, or performs work under contract with, such person with respect to the activities of such person in or affecting commerce.” The sole exceptions to the bill’s prohibition would relate to: (1) the sale of a business’s goodwill or an ownership interest in a business; and (2) the dissolution or disassociation of a partnership. The bill would further provide that any “noncompete agreement” as defined under the bill “shall have no force or effect.”
“Noncompete agreement” is defined as “an agreement, entered into after the date of 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 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.”
The legislation, however, would not apply to nondisclosure agreements that prohibit employees, “with respect to the activities of such person in or affecting commerce,” from disclosing an employer’s trade secrets—even when such agreements extend beyond an employee’s employment with the employer.
Employer Notice Requirements
If enacted, the Workforce Mobility Act would require employers with employees “in or affecting commerce” to “post and maintain notice of the provisions of [the] Act”: (1) “in a conspicuous place” on the employer’s premises; or (2) “in a conspicuous place where notices to employees and applicants for employment are customarily posted physically or electronically.”
Enforcement
The Workforce Mobility Act would vest the FTC and the U.S. Department of Labor with enforcement authority, and it would provide a private right of action for an employee to bring an enforcement action against an employer for a violation of the law. An employee who is successful in bringing such an action would be entitled to recover actual damages and attorneys’ fees. The bill would also allow state attorneys general to bring claims against employers for violations of the Workforce Mobility Act.
Notably, the bill declares pre-dispute arbitration agreements and pre-dispute joint-action waivers unenforceable with respect to claims arising under the Workforce Mobility Act.
Ogletree Deakins’ Unfair Competition and Trade Secrets Practice Group will continue to monitor developments with respect to the Workforce Mobility Act of 2023 and will post updates to the firm’s Unfair Competition and Trade Secrets blog as information becomes available. Important information for employers is also available via the firm’s webinar and podcast programs.
