Bipartisan Non-Compete Bill Introduced

October 25, 2019

Senators Todd Young (R-IN) and Chris Murphy (D-CT) introduced a bill (S. 2614) that would prohibit, and render non-enforceable, non-compete agreements, except under very narrow circumstances, for virtually all employers and employees.

Rationale:  The bill states that non-compete agreements “reduce wages, restrict worker mobility, impinge on worker freedoms to maximize their labor market potential, and slow the pace of American innovation.”  The bill further asserts that employers “have access to legal recourses to protect their legitimate interests and property, including trade secret protections, intellectual property protections, and non-disclosure agreements that do not inflict broad collateral harm on workers’ labor market prospects.”

Exceptions for changes of business:  The only exceptions to the prohibition would be certain sales of businesses and partnership dissolutions.  The bill would also permit agreements prohibiting the sharing of trade secrets as defined under federal criminal law.

Outlook:  While the bill may not receive attention in the current Congress, its bipartisan sponsorship is noteworthy, particularly since it would have a broad application.  Meanwhile, some states and localities are already starting to crack down on non-compete agreements.  This is a topic that Senator Murphy has been focused on for a few years.  In 2015 and 2018, he introduced related bills with Senator Elizabeth Warren (D-MA).  In March, Senator Murphy and others including Senator Young and Senator Marco Rubio (R-FL) asked the Government Accountability Office to review of the effect of non-competition agreements “on workers and on the economy as a whole.”  (Senator Rubio has introduced legislation—S. 124—that would impose restrictions on such agreements with non-exempt employees.)  At the state level, Massachusetts, Oregon, Illinois, and Maryland have passed bills limiting the enforcement of such agreements.