As of Friday (July 16, 2021), we again have competing approaches to federal legislation proposing limits on noncompetes.
The reintroduced Freedom to Compete Act is identical to the version previously introduced by Senator Rubio in January 2019. As before, if passed, the bill would amend the Fair Labor Standards Act of 1938 (29 U.S.C. 201, et seq.) to ban noncompetes for most nonexempt workers.
If you believe that noncompetes are something the federal government should start regulating and that nonexempt workers should be protected from noncompetes, this bill gets pretty close to the mark. However, the bill is not without some problems: It would arguably ban not just true noncompete agreements, but nonsolicitation and other agreements as well (which are often all the more necessary when noncompetes are not available), and unlike most legislation in this area, if passed, it would apply retroactively to pre-existing agreements (which potentially raises Constitutional questions).
Wherever you come out on these issues, this bill is targeted to the abuses of noncompetes and aligns much more closely with how we expect President Biden is “encouraging” the FTC to regulate.
Photo credit: Martin Falbisoner.