Democratic U.S. Senators Elizabeth Warren (D-MA), Chris Murphy (D-Conn.), and Ron Wyden (D-Ore.) introduced legislation on April 26, 2018, entitled the Workforce Mobility Act (“WMA”). Although the text of the WMA is not yet available, according to various press releases, it would prohibit the use of covenants not to compete nationwide. In Senator Warren’s press release announcing her co-sponsorship of the bill, Senator Warren stated that “[t]hese clauses reduce worker bargaining power, stifle competition and innovation, and hurt Americans striving for better opportunities. I’m glad to join Senator Murphy to put an end to these anti-worker, anti-market agreements.”
Not only would the WMA abolish covenants not to compete nationwide, but it would also provide the Department of Labor (DOL) with broad enforcement power. If enacted, the legislation would empower the DOL to enforce the ban through fines on employers who either fail to notify employees that non-compete agreements are illegal or who require employees to sign covenants not to compete.
The bill’s sponsors have stated that the WMA does not impact an employer’s ability to protect its trade secrets. As currently drafted, the WMA does not abrogate the scope of protections provided by the Defend Trade Secrets Act.
Upon introduction by Senator Murphy, the WMA was referred to the Senate Committee on Health, Education, Labor and Pensions. This is the second time Senator Murphy has introduced legislation banning non-compete agreements. In 2015, Senator Murphy co-sponsored bill entitled the ”Mobility and Opportunity for Vulnerable Employees Act” or the “MOVE Act.” If the MOVE Act had been signed into law, it would have prohibited employers from requiring low-wage employees to enter into covenants not to compete and required employers to notify potential employees at the beginning of the hiring process of any requirement to enter into a non-compete agreement. Despite support from the Obama administration, the MOVE Act never made it past the Committee. The WMA is even broader and more restrictive.
Also on April 28, 2018, citing the antitrust laws, members of the House of Representatives, including Democratic Caucus Chairman Joe Crowley (D-NY) and Representatives Keith Ellison (D-MN), David Cicilline (D-RI), Jerrold Nadler (D-NY), Linda Sánchez (D-Calif.), Mark Pocan (D-WI), and Janice Schakowsky (D-Ill.) introduced similar legislation banning non-compete agreements, and providing employees required to sign covenants not to compete with a private right of action in federal court. The House bill is part of a larger legislative package, which is being touted by proponents as “protect[ing] hardworking Americans against anti-competitive employment practices that severely impact workers’ rights.” The package also includes the Restoring and Improving Merger Enforcement Act, the End Employer Collusion Act, and Economic Freedom and Financial Security for Working People Act of 2018.
Presently, there are no federal restrictions on non-compete agreements, and the only states to prohibit them are California, North Dakota, Oklahoma. There have been several attempts in Senator Warren’s home state of Massachusetts to pass legislation prohibiting or restricting the use of non-compete agreements, but to date none have passed. As always, we will continue to monitor state and federal legislation governing restrictive covenant agreements.