Senators Chris Murphy (D-Conn.) and Todd Young (R-Ind.) have introduced legislation entitled the Workforce Mobility Act ("WMA"). The WMA, like its prior incarnation from last year, seeks to ban non-compete agreements outside of the sale of a business or dissolution of a partnership. The WMA also follows a similar, unsuccessful, attempt by the federal government to limit non-compete agreements on a national scale earlier this year.
Not only would the WMA abolish covenants not to compete nationwide, outside of the extremely narrow exceptions highlighted above, but it would also provide the Department of Labor (DOL) and Federal Trade Commission (FTC) with broad enforcement power. If enacted, the legislation would empower the FTC and DOL to enforce the ban through fines on employers who either fail to notify employees that non-compete agreements are illegal or who require employees to sign covenants not to compete. Additionally, the WMA establishes a private right of action for all employees allegedly aggrieved by a violation of the WMA.
The WMA contains a carve out for parties to enter into an agreement to protect trade secrets. As currently drafted, the WMA does not abrogate the scope of protections provided by the Defend Trade Secrets Act.
Upon introduction by Senators Murphy and Young, the WMA was referred to the Senate Committee on Health, Education, Labor and Pensions. This is the third time Senator Murphy has introduced legislation banning non-compete agreements. In 2015, Senator Murphy co-sponsored bill entitled the "Mobility and Opportunity for Vulnerable Employees Act" or the "MOVE Act," and last year he co-sponsored an earlier iteration of the WMA with Senators Elizabeth Warren and Ron Wyden. If the MOVE Act had been signed into law, it would have prohibited employers from requiring low-wage employees to enter into covenants not to compete and required employers to notify potential employees at the beginning of the hiring process of any requirement to enter into a non-compete agreement. Despite support from the Obama administration, the MOVE Act never made it past the Committee. The WMA is even broader and more restrictive.
Presently, there are no federal restrictions on non-compete agreements, and enacting such a law would have to pass Constitutional muster. But states across the nation have adopted legislation inching those states closer to California's well-known ban on most post-employment restrictive covenants, including Massachusetts, New Hampshire, Washington, Maine, North Dakota, and Oklahoma. As always, we will continue to monitor state and federal legislation governing restrictive covenant agreements.
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