February 20, 2023Client Alert

Workforce Mobility Act of 2023: Another Attempt to Ban Non-Compete Agreements Nationwide

On February 1, 2023, a bipartisan group of U.S. Senators reintroduced a bill called “Workforce Mobility Act of 2023” (“Act”), seeking to ban the use and enforcement of post-employment non-competition agreements nationwide. The versions of this Act were introduced several times before, most recently in 2021.  The latest version was reintroduced only several weeks after the Federal Trade Commission proposed the rule to make most employment non-compete agreements, as well as those agreements that “de facto” function as non-compete agreements, an unfair deceptive trade practice under federal law (as discussed in our January 6, 2023 Client Alert).  The Act is another attempt to get this legislation passed as the prior versions of the Act did not even make it to a committee vote.

So, what is in the Act this time around?  The Act provides that, with certain limited exceptions, “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.”  Such agreements will have no force or effect under the Act.

The Act 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.”

The Act provides limited exceptions where non-compete agreements can still be entered into and enforced, such as when non-compete agreements are executed in connection with the sale of a business (including with senior executives as part of a severance agreement) or the dissolution of a partnership.  Notably, the Act clarifies that it does not preclude confidentiality agreements protecting trade secrets but makes no mention of non-solicitation agreements.

As for enforcement, the Act would authorize the Federal Trade Commission and federal Department of Labor to enforce the prohibition on noncompete agreements and investigate violations.  Also, it would provide a private right of action to employees to sue employers for violating the ban and allow them to recover not only actual damages but also attorney’s fees and costs.  States’ attorneys general would also be authorized to bring lawsuits against employers for violating the Act.

If passed, the Act would require all employers to post notice of the provisions of the Act in a conspicuous place where notices to employees and applicants for employment are customarily posted physically or electronically.

Whether the Act will get enough bipartisan support from both chambers of Congress this time around remains to be seen.  Given that control over the two houses of Congress are split between Republicans and Democrats, the odds may be against the passage of this bill.   However, if both the House of Representatives and the Senate passed the Act, President Biden would likely sign it into law as he expressed his strong support for banning non-compete agreements, including in his recent State of the Union address.

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