The Workforce Mobility Act of 2023 would prevent any person or business from entering into, enforcing or attempting to enforce a noncompete agreement.

In the wake of the Federal Trade Commission’s (FTC) proposed regulation banning noncompete agreements except in limited circumstances, a bipartisan Senate group led by Democrat Senator Chris Murphy of Connecticut and Republican Senator Todd Young of Indiana introduced the Workforce Mobility Act of 2023 on February 1, 2023. If enacted, the legislation would effectively eliminate noncompete agreements entered into after the bill becomes law.

The Proposed Ban

The Workforce Mobility Act of 2023 would prevent any person or business from entering into, enforcing or attempting to enforce a noncompete agreement. Employers would also be required to conspicuously post notices informing workers of the ban on noncompete agreements.

The act defines a “noncompete agreement” as:

[A]n agreement, entered into after the date of enactment of this Act between a person and an individual performing work for the person, that restricts such individual, after the working relationship between the person and 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. [Emphasis added.]

The act still leaves some questions open, including the impact on nonsolicitation agreements.

How Does the Proposed Ban Impact Noncompete Clauses in Existing Agreements?

The primary difference between the act and the FTC’s proposed rule banning noncompete agreements is that the act would not apply to noncompete agreements entered into prior to its enactment.

Are There Any Exceptions to the Proposed Ban?

The act would prevent post-employment noncompete restrictions, but does not apply to restrictions during employment that are often found in employer policies on conflicts of interest and other employment policies and agreements. 

The act contains three limited exceptions where noncompete agreements could still be entered into and enforced:

• The first exception involves the sale of goodwill or ownership interests in a business. When such a sale takes place, the buyer could include a noncompete provision in the contract prohibiting the seller from carrying on a competing or similar business in the same geographic area in which the business previously operated.
• The second exception provides that, in connection with a sale of goodwill or ownership interests, a buyer or seller can enter into a severance agreement with senior executives that includes a noncompete provision of up to one year, limited to the geographic region in which the company previously operated. The senior executives with noncompete agreements must be guaranteed severance payments of at least one year’s salary or compensation in the event their employment is terminated.
• The third exception allows for noncompete provisions in partnership agreements. Noncompete provisions would be allowed in such agreements to prevent departing partners from carrying on similar businesses in the same geographic area where the partnership operates or operated (in the event of a partnership dissolution).

Who Is Authorized to Enforce the Proposed Ban?

The act, if passed, would give joint authority to the FTC and to the Department of Labor to enforce the ban on noncompete agreements and to investigate violations. Further, the act would provide a private right of action for individuals to sue employers for violating the ban. Successful plaintiffs could recover actual damages, along with attorney’s fees and costs. States’ attorneys general would also be authorized to bring claims against employers for violating the act.

How Does This Proposed Ban Compare to Prior Attempts to Ban Noncompete Agreements?

This is now the third time the act has been introduced, having failed to gain traction the two prior times it was introduced in 2019 and 2021. This time around, it appears to be gaining traction on both sides of the aisle in the House and the Senate. In addition to the two lead sponsors, Senators Tim Kaine, D-Va., and Kevin Cramer, R-N.D., have joined as co-sponsors. Further, Representatives Scott Peters, D-Calif.-52, and Mike Gallagher, R-Wis.-8, introduced the same bill in the House of Representatives.

Regardless of whether the act takes effect, employers need to keep in mind that many state and local jurisdictions currently have restrictions on and requirements for noncompete clauses and other post-employment restrictive covenants.

For More Information

If you have any questions about this Alert, please contact Lawrence H. Pockers, Shannon Hampton Sutherland, Leah Mintz, any of the attorneys in our Non-Compete and Trade Secrets Group, any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.