Sweeping Ban on Non-Compete Agreements in Senate HELP Committee Health Care Bill

The Primary Care and Health Workforce Expansion Act, which the Senate HELP Committee is scheduled to mark up on July 26, includes a sweeping ban on non-compete agreements with some limited exceptions.

The legislative text does not amend, or add to, any other law. The bill simply inserts the language of the Workforce Mobility Act (S. 220), sponsored by Sen. Chris Murphy (D-CT), which provides a broad prohibition on non-compete agreements.

Sweeping ban. The bill prohibits employers from entering into, enforcing, or attempting to enforce a non-compete agreement with any individual who is employed by, or performs work under contract with the employer.

Exceptions include:

• A seller of a business may enter into an agreement with the buyer to refrain from carrying on a like business within certain specified geographic areas if the buyer carries on a like business in such specified geographic area;
  
  
• A buyer or seller of a business may enter into a non-compete agreement with “senior executive officials” that provide severance agreements that pay at least the equivalent of what the executive “would be reasonably expected to receive” during the one year following the sale had they remained employed; and
  
  
• Partnership dissolutions or disassociations.

Senior executive officials include employees acquired by the buyer and who are responsible for making or directing major decisions of the seller; and whose compensation was in the highest 10 percent of all employees of the seller.

Trade secret agreements would still be allowed.

The FTC and Labor Department would enforce the prohibition, and individuals could bring a private right of action in district court. State attorneys general may also enforce the ban.

Arbitration and joint action waivers would not apply. Specifically, notwithstanding any other provision of law, no predispute arbitration agreement or predispute joint action waiver shall be valid or enforceable with respect to any alleged violation of the non-compete prohibition.

Outlook: HR Policy reached out to Senate HELP Committee staff to flag this legislation and express concern over the language. We also urged members of the committee to pull this section from the bill or offer an amendment to strike the section during the markup.