Legislation Limiting Use of Non-Compete Agreements Reintroduced in House and Senate with Bipartisan Support

On February 25, 2021, Senators Chris Murphy (D-Conn.) and Todd Young (R-Ind.) reintroduced the “Workforce Mobility Act,” which limits the use on non-compete agreements in employment.  Senators Murphy and Young previously introduced the same legislation in late 2019, though with the little success.  This time, however, the Workforce Mobility Act is co-sponsored by Senators Tim Kaine (D-Va.) and Kevin Cramer (R-N.D.).  Further, companion legislation has been introduced in the House of Representatives.  The bipartisan support for the bill offers renewed hope that it might pass this time around.

In support of the bill, its co-sponsors have highlighted the fact that “[a]n alarming 40% of American workers have been constrained by a non-compete at some point in their careers.”  In reality, as many as 47% of American workers—or, put differently, roughly 60 million people—may have signed such restrictive covenants.  These restrictions can cover large geographic areas and span several years, making it difficult for workers to find new employment near their homes and within their industries.  Even unenforceable non-competes may deter employees from applying to competitors.
To address this widespread, pernicious problem for employees across the country, the Workforce Mobility Act would:

•    Narrow the use of non-compete agreements to be permissible only in instances of a dissolution of a partnership or the sale of a business;

•    Grant enforcement authority to the Federal Trade Commission and the Department of Labor, in addition to providing for a private right of action;

•    Require employers to make their employees aware of the limitation on non-competes, as studies have found that non-competes are often used even when they are illegal or unenforceable.  The Department of Labor would also be given the authority to make the public aware of the limitation; and

•    Require the Federal Trade Commission and the Department of Labor to submit a report to Congress on any enforcement actions taken.

To be sure, prior efforts to restrict non-competes have proven ineffective.  For example, one survey found that 45% of hiring managers in California subject some workers to non-competes, despite the fact that such agreements are unenforceable in the Golden State as a matter of law.  Nevertheless, the Workforce Mobility Act provides renewed hope that this pervasive issue might finally be addressed, particularly given the legislation’s apparent bipartisan support.