BFV Perspectives, Noncompete & Trade Secrets, | Feb 13, 2023

More Bipartisan Federal Noncompete Legislation Introduced in Congress

We reported last week that a bipartisan group of senators had reintroduced the Workforce Mobility Act, which would ban most noncompetes.  Well, another piece of bipartisan legislation has been reintroduced.  More specifically, Senators Rubio and Hassan reintroduced noncompete legislation that takes a more modest approach than either the Workforce Mobility Act or the FTC’s proposed noncompete ban.

Their legislation, titled the Freedom to Compete Act, is targeted at protecting low-wage workers from noncompetes.  The bill would amend the Fair Labor Standards Act of 1938 to prevent employers from using noncompetes in employment contracts for certain non-exempt employees.

According to Senator Rubio’s summary of the bill, the Freedom to Compete Act would apply only to employees who do not qualify for the FLSA’s minimum wage and overtime exemption for bona fide executive, administrative, professional and outside sales employees.  The law would prohibit an employer from entering into or enforcing a noncompete with a non-exempt employee.

Whereas the FTC’s proposed ban and the proposed Workforce Mobility Act would largely ban noncompetes even for high-level employees with access to trade secrets, the Freedom to Compete Act is aimed more directly at one way in which companies abuse noncompetes, i.e., having low-wage, hourly workers sign them.  Senator Rubio’s summary of the bill aptly summarizes its purpose:

“Historically, non-compete agreements were used to prevent an employer’s trade secrets from being disclosed to competitors by former employees.  However, today’s noncompete agreements can be found in employment contracts for entry-level, low-wage workers who do not have access to trade secrets.  Non-compete agreements limit employment opportunities for those entry-level, low-wage workers to improve their circumstances and negotiate higher wages, benefits, and training.”

It remains to be seen whether the Freedom to Compete Act (or the Workforce Mobility Act) will get traction in Congress given the potentially looming FTC rule.

Speaking of the Federal Trade Commission’s proposed rule, the FTC announced it will be holding a public form on the rule this Thursday, February 16.  The stated purpose is to “provid[e] an opportunity for people to directly share their experiences with noncompetes.”  The program begins at 12 p.m. EST, lasts three hours, and will be webcast on the FTC’s website.

Stay tuned to BFV’s blog for the latest developments on the FTC’s rule and related legislation.  And if you have questions or need assistance with a noncompete issue in the interim, please feel free to reach out to me.

BFV Perspectives, Noncompete & Trade Secrets, | Feb 13, 2023
Neal F. Weinrich
Neal F. Weinrich

Neal Weinrich knows noncompetes and trade secrets inside and out. A shareholder at Berman Fink Van Horn, Neal counsels clients in all industries on matters involving restrictive covenants, trade secrets and other competition-related issues.