Déjà vu all over again (and again and again): A proposed federal noncompete ban returns (yet again)

Well, some Senators are back at it once again: an apparent redo of the federal noncompete bill to ban noncompetes.

The same four Senators who have been pushing for a federal noncompete ban for years — Chris Murphy (D-Conn.), Todd Young (R-Ind.), Kevin Cramer (R-N.D.) and Tim Kaine (D-Va.) — have recently introduced another one: “A bill to prohibit certain noncompete agreements, and for other purposes.”

We don’t yet know what it says, but we can guess.

Based on the title of the bill and the bills they previously introduced (see, e.g., “Workforce Mobility Act of 2023”), we can expect that the bill will be a ban on all employee noncompetes, while permitting only certain noncompetes in the context of the sale of a business (and similar contexts). I expect it will also vest the FTC and Department of Labor with enforcement.

Is a complete ban of employee noncompetes a good idea?

No.

As readers of this blog know — putting aside whether the federal government can or should regulate a traditional state contract issue (a topic on which I have very mixed feelings) — I think that sweeping legislation with potentially significant ramifications for people, companies, and the economy should be based on more than political expediency, soundbites, and nuanced, inconclusive, and sometimes inconsistent studies. For more on that, see President Biden’s Proposed Ban of (Most) Noncompetes: Protection Strategies and Steps to Take Now, Please Stop Using California as the Poster Child to Ban Noncompetes – Time for an Honest Policy Discussion, Correlation Does Not Imply Causation: The False Comparison of Silicon Valley and Boston’s Route 128, and the letter that I along with 100 other lawyers submitted to the FTC in connection with its (seemingly abandoned) proposed Noncompete Rule.

And, as I noted those posts and the letter, though it may occasionally appear otherwise, I actually don’t think that noncompetes are warranted nearly as often as I see them used. But, I recognize that they are sometimes necessary. That’s because every day (quite literally), I see employees and new employers engage in conduct that underscores the need for noncompetes. Conversely, I also regularly see conduct by employees and employers that is beyond reproach. But it’s often not clear which of these paradigms will apply when an employee leaves, and noncompetes should be available when circumstances require them.

That said, more narrow regulation — for example, most of those identified in President Obama’s Call to Action on noncompetes — could be appropriate to address the abuses of noncompetes that gave rise to this movement in the first place. Indeed, many states already have imposed those types of limitations, and others have them in the works.

Looking for a quick reminder of the prior federal noncompete bills?

On July 15, 2021, Freedom To Compete Act (S.2375) was reintroduced to ban noncompetes for workers who are not exempt under the Fair Labor Standards Act.

On November 3, 2021, the “Employment Freedom for All Act” (H.B.5851) was introduced in the House by U.S. Congresswoman Claudia Tenney to “void existing non-compete agreements for any employee who is fired for not complying with an employer’s COVID-19 vaccine mandate, and for other purposes.”

On November 12, 2021, the FTC posted a draft Strategic Plan for Fiscal years 2022-2026. That plan contained two express references to noncompetes and some other language that seems aligned with President Biden’s Executive Order. (For more information, see The FTC’s Draft Strategic Plan: What it says about noncompetes and other restrictive covenants.)

On November 30, 2021, Representative Janice Schakowsky introduced the FTC Whistleblower Act of 2021 (H.R.6093) was introduced to void noncompetes for whistleblowers to the FTC.

On August 30, 2022, Representative Mike Garcia introduced the Restoring Workers’ Rights Act of 2022. The bill would have amended the Fair Labor Standards Act of 1938(29 U.S.C. 201, et seq.) to essentially ban noncompetes — both retroactively and prospectively — for workers who are not exempt (under the FLSA).

On January 25, 2023, Representative Claudia Tenney was the first in the new Congressional Session to introduce noncompete legislation, reintroducing the Ensure Vaccine Mandates Eliminate Non-Competes Act (the “EVEN Act”) “[t]o void existing non-compete agreements for any employee who is fired for not complying with an employer’s COVID-19 vaccine mandate, and for other purposes.”

On February 1, 2023, Senators Young and Murphy (along with the support of two other co-sponsors) again proposed a ban on all employee noncompetes (i.e., permitting sale of business noncompetes) and Representative Scott Peters (along with the support of two other co-sponsors) filed a House version of the same re-proposed ban.

On February 9, 2023, Senators Marco Rubio and Maggie Hansen reintroduced the Freedom to Compete Act. Like the prior versions, the bill would ban noncompetes for anyone not exempt under the Fair Labor Standards Act — the approach taken first by Massachusetts and later by Rhode Island.

On March 6, 2023, Senators Klobuchar, Collins, Rosen, Tillis, King, Thune, Merkley, Capito, Coons, Paul, Durbin, Moran, Shaheen, Wicker, Smith, Marshall, Blumenthal, Cramer, and Boozman introduced the Conrad State 30 and Physician Access Reauthorization Act, which primarily addresses immigration issues for physicians in underserved communities, but would also ban the use of noncompetes for those covered by the Act.

On July 26, 2023, Representative Bradley Schneider introduced the House companion of the Conrad State 30 and Physician Access Reauthorization Act.

Nothing yet. We’ll keep you posted.