Workforce Mobility Act of 2023
In the United States Senate, a bipartisan group of Senators have reintroduced a bill, titled the “Workforce Mobility Act of 2023.” This would ban the use of non-compete agreements nationwide as a matter of federal statute. This comes after the Federal Trade Commission (FTC)’s proposed rule to ban non-compete agreements.
What’s So Bad About Work Restriction Clauses?
The Workforce Mobility Act of 2023 provides its rationale to end the enforcement of non-competes (also called a covenant not to compete). The Bill provides:
Congress finds the following:
(1) The proliferation of noncompete agreements throughout sectors, occupational categories, and in come brackets is contrary to the commitment of Congress to foster stronger wage growth for workers in the United States. Economists now estimate that 1 in 5 workers is covered by a noncompete agreement.
(2) Noncompete agreements are blunt instruments that crudely protect employer interests and place a drag on national productivity by forcing covered workers to either idle for long periods of time 8 or leave the industries in which the workers have honed their skills altogether.
(3) Enforceable noncompete agreements also reduce wages, restrict worker mobility, impinge on the freedom of a worker to maximize labor market potential, and slow the pace of innovation in the United States.
How Far Will the Proposed Ban Go?
The proposed ban would deem non-competes a form of unfair trade practices, creating a cause of action against the employer for unfairly restricting business. In other word, it would authorize the FTC, federal Department of Labor, state attorneys general, and employees here in Pennsylvania to bring actions against any employer in violation of the Act. It also authorizes the imposition of penalties, damages, injunctions, and other relief.
What Rights Will Employers Retain?
Here, the proposed bill states that, for employers, certain protections will remain:
(4) Employers have access to legal recourses to protect their legitimate interests and property, including trade secret protections, intellectual property protections, and nondisclosure agreements that do not inflict broad collateral harm on the labor market prospects for workers.
(5) Employers that rely on a list or lists of vendors, customers, or clients that are not easily obtained by an individual through means other than the work relationship have adequate legal protection through the use of trade secret protections and nondisclosure agreements.
No Preclusion of Trade Secret Protection
Employer often fear that an outgoing employee will (1) go to work for a competitor and (2) share the employer’s trade secrets. However, sub-part 5, above, is noteworthy: the Workforce Mobility Act (and its ban on noncompetes) will have no effect on trade secret law. Nearly every state has some version of the Uniform Trade Secrets Act. The existing protections of an employer’s trade secrets, such as customer or vendor lists, or a description of the company’s “secret sauce” – will remain in full force and effect. But we look for ways that an employer may have waived the trade secret protection by making public disclosure of the “secret.”
Non-disclosure Agreements Will Remain in Full Force
Sub-part 5, above, also recognizes the value of non-disclosures agreements (or NDAs). NDAs help protect an employer’s information, even if it does not rise to the level of a “trade secret.” Here, again, another important tool by the employer will remain in tact.
Non-Solicitation Agreements Will Also Remain in Effect
Sub-part 5, above, also covers by implication non-solicitation agreements. This is where the employee agrees not to solicit any customer or employee of the former employer. Here, Sub-part 5 acknowledges the need to protect customer lists and other information worthy of protection for the employer, when an employee leaves and places such information or contacts in jeopardy.
Work Restriction Related to the Sale of a Business
The ban on work restriction clauses only pertains to employer-employee contracts. It would not ban non-competes in contracts related to the sale of a business. There, it is presumed that the parties to the agreement possess equal bargaining leverage. Thus, in that scenario, the non-compete would be fair and not violate consumer protection law or principles.
Will The Workforce Mobility Act of 2023 Become Law?
Hard to say. The bill needs to pass not only the Senate, but the employer-friendly House of Representatives. Significant push-back is expected, but one thing is certain: several states plus the District of Columbia have banned non-compete clauses. Canada also.
Implications, Even if Dies in the House
Even if the Workforce Mobility Act of 2023 fails to become law, it reflects a growing policy away from enforcing non-compete agreements in the United States. This could have implications for litigation in Pennsylvania. Here, it is a defense to enforcement of a contract that the agreement is “against public policy.” Thus, the public policy defense gains strength with each new attempt in this country to ban non-competes.
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