In the proposed “Workforce Mobility Act of 2023,” another attempt has been made to ban non-compete agreements.
The Proposed “Workforce Mobility Act of 2023”
A bipartisan group of U.S. senators introduced the “Workforce Mobility Act of 2023 ” (“Act”) on February 1, 2023, seeking to ban the use and enforcement of post-employment noncompetition agreements. This Act has been introduced several times before, most recently in 2021. Only a few weeks after the Federal Trade Commission proposed the rule that would make employment non-compete agreements, as well as those agreements that function “de facto” as non-compete agreements, unfair deceptive trade practices under federal law . This proposed legislation is another attempt to pass this ban,as previous efforst did not make it to a committee vote.
According to the bill, a noncompete agreement cannot be entered into, enforced, or attempted to be enforced with any individual employed by or performing work for such person with respect to commerce, with certain limited exceptions. In light of the Act, such contracts will not have force or effect.
The proposed legislation defines a “noncompete agreement” broadly as “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 (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.”
Under the draft proposal, non-compete agreements can still be entered into and enforced in limited circumstances, such as in connection with the sale of a business (including with senior executives as part of a severance agreement) or the dissolution of a partnership. However, the proposed language does not mention non-solicitation agreements, although it clarifies that confidentiality agreements do not preclude them.