Congress Aims to Restrict Use of Non-Competes Nationwide

As reported by Trade Secrets Watch last month, several states (including Maryland, Maine, New Hampshire, and Rhode Island) recently passed legislation curtailing the use of non-compete agreements.  Now, the federal government wants in on the action.

On October 16, 2019, Sens. Chris Murphy, D-Conn., and Todd Young, R-Ind., reintroduced the Workforce Mobility Act (the “WMA”) after an earlier version died in the Senate in 2018.  If passed, the WMA would restrict the use of non-competes more thoroughly than any of the recent state legislation as it generally would limit the use of non-competes to partnership split-ups or business sales.  In other words, the WMA would effectively apply California-like non-competition law across the entire nation and would make most states’ non-competition laws largely superfluous.

The WMA recounts the following findings to support the bill:  (a) the proliferation of non-competes is contrary to Congress’s “commitment to fostering stronger wage growth for workers” yet one in five workers is subject to a non-compete; (b) non-competes “crudely protect employer interests and place a drag on national productivity by forcing covered workers to either idle for long periods of time or leave the industries where they have honed their skills altogether”; (c) non-competes reduce wages, restrict mobility, and slow innovation; (d) employers, including those reliant on lists of vendors, customers, or clients, have various other means to protect their intellectual property that do not “inflict broad collateral harm on workers’ labor market prospects”; and (e) employers have other means to retain critical skilled employees without the use of non-competes.

Opponents of the bill likely will argue that each state should be permitted to fashion its own non-competition law and non-competes have certain positive effects such as guarding against intellectual property misappropriation.

The bill has been referred to the Committee on Health, Education, Labor, and Pensions.  Trade Secrets Watch will continue to report on the bill as new developments emerge.