Workforce Mobility Act of 2023
This bill prohibits the use of noncompete agreements in the context of commercial enterprises except under certain circumstances.
The first exception is that the seller of a business entity may enter into an agreement to refrain from engaging in a similar business in the geographic area where the business being sold has conducted business prior to the agreement. This exception extends to agreements by senior executive officials who have a severance agreement as part of the conditions of sale (i.e., a buyout provision). Second, a partner of an enterprise may enter into an agreement that, upon dissolution of the partnership or dissociation of the partner from the partnership, the partner will refrain from engaging in a similar business in the geographic areas where the partnership has conducted business prior to the agreement.
Commercial enterprises must post notice of the prohibition of noncompete agreements under this bill in a conspicuous area of the workplace and conduct a public awareness campaign to inform the public of the provisions of this bill.
The Federal Trade Commission or the Department of Labor shall investigate or enforce the provisions of the bill. Individuals and state attorneys general may also bring civil actions to enforce the provisions of the bill.
[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 731 Introduced in House (IH)]
<DOC>
118th CONGRESS
1st Session
H. R. 731
To prohibit certain noncompete agreements, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 1, 2023
Mr. Peters (for himself, Mr. Gallagher, and Ms. Eshoo) introduced the
following bill; which was referred to the Committee on Energy and
Commerce, and in addition to the Committee on Education and the
Workforce, for a period to be subsequently determined by the Speaker,
in each case for consideration of such provisions as fall within the
jurisdiction of the committee concerned
_______________________________________________________________________
A BILL
To prohibit certain noncompete agreements, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Workforce Mobility Act of 2023''.
SEC. 2. FINDINGS.
Congress finds the following:
(1) The proliferation of noncompete agreements throughout
sectors, occupational categories, and income brackets is
contrary to the commitment of Congress to foster stronger wage
growth for workers in the United States. Economists now
estimate that 1 in 5 workers is covered by a noncompete
agreement.
(2) Noncompete agreements are blunt instruments that
crudely protect employer interests and place a drag on national
productivity by forcing covered workers to either idle for long
periods of time or leave the industries in which the workers
have honed their skills altogether.
(3) Enforceable noncompete agreements also reduce wages,
restrict worker mobility, impinge on the freedom of a worker to
maximize labor market potential, and slow the pace of
innovation in the United States.
(4) Employers have access to legal recourses to protect
their legitimate interests and property, including trade secret
protections, intellectual property protections, and
nondisclosure agreements that do not inflict broad collateral
harm on the labor market prospects for workers.
(5) Employers that rely on a list or lists of vendors,
customers, or clients that are not easily obtained by an
individual through means other than the work relationship have
adequate legal protection through the use of trade secret
protections and nondisclosure agreements.
(6) Noncompete agreements broadly restrict employment
options for workers in the United States when more narrowly
targeted remedies are readily available to employers.
(7) Fostering an environment where employers can flourish
is necessary to promote vitality and prosperity in the economy.
(8) Employers may retain critical skilled employees while
ensuring that disincentives affecting mobility, including
noncompete agreements, do not negatively impact the workforce
in the United States.
SEC. 3. PROHIBITING NONCOMPETE AGREEMENTS.
(a) Prohibition.--
(1) In general.--Except as provided in subsection (b), no
person shall enter into, enforce, or attempt to enforce a
noncompete agreement with any individual who is employed by, or
performs work under contract with, such person with respect to
the activities of such person in or affecting commerce.
(2) Effect of agreements.--Except as provided in subsection
(b), a noncompete agreement described in paragraph (1) shall
have no force or effect.
(b) Exceptions.--
(1) Sale of goodwill or ownership interest.--
(A) In general.--A seller of a business entity may
enter into an agreement with the buyer to refrain from
carrying on a like business within a specified
geographic area described in subparagraph (C), if the
buyer, or any person deriving title to the goodwill of
the business entity or an ownership interest in the
business entity from the buyer, carries on a like
business in such specified geographic area.
(B) Senior executive officials with severance
agreements.--
(i) In general.--Subject to clause (ii), a
buyer or seller of a business entity may enter
into a noncompete agreement with a senior
executive official who has a severance
agreement described in clause (iii) that
restricts the senior executive official from
performing, within a specified geographic area
described in subparagraph (C), any work that is
similar to the work that the senior executive
official performed for the buyer or seller, if
the buyer, or any person deriving title to the
goodwill of the business entity or an ownership
interest in the business entity from the buyer,
carries on a like business in such specified
geographic area.
(ii) Time-limited agreement.--A noncompete
agreement described in clause (i) may not
restrict the senior executive official as
described in such clause for a period that is
more than one year.
(iii) Severance agreement.--A severance
agreement described in this clause is an
agreement between the buyer or seller of a
business entity and a senior executive official
that--
(I) is part of the terms and
conditions of the sale; and
(II) requires monetary compensation
for the senior executive official in
the event of termination of the
employment of the senior executive
official at an amount that is not less
than the compensation that the senior
executive official is or would be
reasonably expected to receive from the
buyer during the 1-year period
following the sale.
(C) Specified geographic area.--A specified
geographic area described in this subparagraph is a
geographic area--
(i) that is specified in an agreement
described in subparagraph (A), or a noncompete
agreement described in subparagraph (B),
regarding a business entity; and
(ii) in which such business entity,
including any division or subsidiary of such
business entity, conducted business prior to
the agreement or noncompete agreement.
(2) Partnership dissolution or disassociation.--
(A) In general.--Any partner of a partnership may
enter into an agreement with any other member of the
partnership that, upon the dissolution of the
partnership or dissociation of the partner from such
partnership, the partner will refrain from carrying on
a like business within a specified geographic area
described in subparagraph (B), if any other member of
the partnership, or any person deriving title to the
partnership or the goodwill of the partnership from any
other member of the partnership, carries on a like
business in such specified geographic area.
(B) Specified geographic area.--A specified
geographic area described in this subparagraph is a
geographic area--
(i) that is specified in an agreement
described in subparagraph (A); and
(ii) in which any business of the
partnership has been transacted prior to the
agreement.
SEC. 4. TRADE SECRETS.
Nothing in this Act shall preclude a person from entering into an
agreement with an individual who is employed by, or performs work under
contract with, such person with respect to the activities of such
person in or affecting commerce to not disclose any information
(including after the individual is no longer employed or performing
work for the person) regarding the person, or the work performed by the
individual for the person, that is a trade secret.
SEC. 5. NOTICE; PUBLIC AWARENESS CAMPAIGN.
(a) Notice.--Any person who engages an individual who is employed
by, or performs work under contract with, such person with respect to
the activities of such person in or affecting commerce shall post and
maintain notice of the provisions of this Act--
(1) in a conspicuous place on the premises of such person;
or
(2) in a conspicuous place where notices to employees and
applicants for employment are customarily posted physically or
electronically by such person.
(b) Public Awareness Campaign.--The Secretary of Labor may carry
out activities to make the public aware of the provisions of this Act.
SEC. 6. ENFORCEMENT.
(a) Federal Trade Commission.--
(1) Unfair or deceptive acts or practices.--A violation of
section 3 or 5(a) shall be treated as a violation of a rule
defining an unfair or deceptive act or practice prescribed
under section 18(a)(1)(B) of the Federal Trade Commission Act
(15 U.S.C. 57a(a)(1)(B)).
(2) Powers of commission.--
(A) In general.--The Federal Trade Commission shall
enforce sections 3 and 5(a) in the same manner, by the
same means, and with the same jurisdiction, powers, and
duties as though all applicable terms and provisions of
the Federal Trade Commission Act (15 U.S.C. 41 et seq.)
were incorporated into and made a part of this Act.
(B) Privileges and immunities.--Any person who
violates section 3 or 5(a) shall be subject to the
penalties and entitled to the privileges and immunities
provided in the Federal Trade Commission Act (15 U.S.C.
41 et seq.).
(C) Authority preserved.--Nothing in this Act shall
be construed to limit the authority of the Federal
Trade Commission under any other provision of law.
(b) Department of Labor.--
(1) In general.--The Secretary of Labor--
(A) shall investigate as the Secretary determines
necessary to determine violations of section 3 or 5(a)
by an employer; and
(B) may, subject to paragraph (2), bring an action
in any court of competent jurisdiction to obtain the
legal or equitable relief against an employer on behalf
of an individual aggrieved by the violation as may be
appropriate to effectuate the purposes of such
sections.
(2) Statute of limitations.--An action described in
paragraph (1)(B) may not be commenced later than 4 years after
the date on which the violation occurred.
(3) Regulations.--Not later than 18 months after the date
of enactment of this Act, the Secretary of Labor, in
consultation with the Chair of the Federal Trade Commission,
shall issue regulations as necessary to carry out this Act,
including with respect to the authority of the Secretary of
Labor to enforce violations of section 3 or 5(a) in accordance
with paragraph (1).
(c) Standards for Dual Enforcement.--Not later than 1 year after
the date of enactment of this Act, the Federal Trade Commission and the
Secretary of Labor shall, for the purposes of enforcing this Act--
(1) develop shared standards for consistent enforcement;
and
(2) identify the scope of responsibility of the Federal
Trade Commission and such scope of the Secretary of Labor to
ensure complementary enforcement of this Act.
(d) Reporting Violations.--
(1) In general.--The Federal Trade Commission and the
Secretary of Labor shall each establish a system to receive
complaints by individuals regarding alleged violations of
section 3.
(2) Confidentiality.--Except as otherwise required by law,
the Federal Trade Commission and the Secretary of Labor may not
disclose the identity or identifying information of any
individual providing a complaint under paragraph (1), without
explicit consent from the individual.
(e) Private Right of Action.--
(1) In general.--An individual who is aggrieved by a
violation of this Act may bring a civil action in any
appropriate district court of the United States.
(2) Relief.--In a civil action under paragraph (1), a court
may award--
(A) any actual damages sustained by the individual
as a result of the violation; and
(B) in the case of any successful action, the costs
of the action and reasonable attorney's fees, as
determined by the court.
(f) Enforcement by States.--
(1) In general.--In any case in which the attorney general
of a State has reason to believe that an interest of the
residents of the State has been or is threatened or adversely
affected by any person who violates any provision of section 3
or 5(a) or any rule promulgated under this Act to carry out
such section, the attorney general of the State, as parens
patriae, may bring a civil action on behalf of the residents of
the State in an appropriate State court or an appropriate
district court of the United States to--
(A) enjoin any further such violation by the
person;
(B) compel compliance with section 3 or 5(a) or any
such rule;
(C) obtain a permanent, temporary, or preliminary
injunction;
(D) obtain damages, restitution, or other
compensation on behalf of the residents of the State;
or
(E) obtain any other appropriate equitable relief.
(2) Preservation of state powers.--Nothing in this
subsection shall be construed as altering, limiting, or
affecting the authority of the attorney general of a State to--
(A) bring an action or other regulatory proceeding
arising solely under the laws in effect in that State;
or
(B) exercise the powers conferred on the attorney
general by the laws of the State, including the ability
to conduct investigations, administer oaths or
affirmations, or compel the attendance of witnesses or
the production of documentary or other evidence.
(g) Arbitration and Class Action.--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 section 3 or 5(a).
SEC. 7. REPORTS.
Not later than 1 year after the date on which the Secretary of
Labor issues any regulations under section 6(b)(3), the Federal Trade
Commission and the Secretary of Labor shall each submit to Congress a
report on any actions taken by the Federal Trade Commission or
Secretary, respectively, to enforce the provisions of this Act.
SEC. 8. DEFINITIONS.
For purposes of this Act:
(1) Business entity.--The term ``business entity'' means
any partnership (including a limited partnership or a limited
liability partnership), limited liability company (including a
series of a limited liability company formed under the laws of
a jurisdiction that recognizes such a series), or corporation.
(2) Buyer.--The term ``buyer'', with respect to a business
entity, means any person who buys the goodwill of the business
entity, buys or otherwise acquires ownership interest in the
business entity, or buys a qualified asset or interest with
regard to the business entity.
(3) Class action.--The term ``class action'' means a
lawsuit in which 1 or more parties seek or obtain class
treatment pursuant to rule 23 of the Federal Rules of Civil
Procedure or a comparable rule or provision of State law.
(4) Commerce.--The term ``commerce'' has the meaning given
the term in section 3 of the Fair Labor Standards Act of 1938
(29 U.S.C. 203).
(5) Employ; employee; employer.--The terms ``employ'',
``employee'', and ``employer'' have the meanings given such
terms in section 3 of such Act (29 U.S.C. 203).
(6) Noncompete agreement.--The term ``noncompete
agreement'' means an agreement, entered into after the date of
enactment of this Act between a person and an individual
performing work for the person, that restricts such individual,
after the working relationship between the person and
individual terminates, from performing--
(A) any work for another person for a specified
period of time;
(B) any work in a specified geographical area; or
(C) any work for another person that is similar to
such individual's work for the person that is a party
to such agreement.
(7) Owner of a business entity.--The term ``owner of a
business entity'' means--
(A) in the case of a business entity that is a
partnership (including a limited partnership or a
limited liability partnership), any partner;
(B) in the case of a business entity that is a
limited liability company (including a series of a
limited liability company formed under the laws of a
jurisdiction that recognizes such a series), any member
of such company; or
(C) in the case of a business entity that is a
corporation, a capital stockholder of the business
entity who owns not less than 5 percent of the capital
stock.
(8) Ownership interest.--The term ``ownership interest''
means--
(A) in the case of a business entity that is a
partnership (including a limited partnership or a
limited liability partnership), a partnership interest;
(B) in the case of a business entity that is a
limited liability company (including a series of a
limited liability company formed under the laws of a
jurisdiction that recognizes such a series), a
membership interest; or
(C) in the case of a business entity that is a
corporation, not less than 5 percent of the capital
stock of the business entity or, as applicable, a
subsidiary of the business entity.
(9) Person.--The term ``person'' has the meaning given the
term in section 3 of the Fair Labor Standards Act of 1938 (29
U.S.C. 203).
(10) Predispute arbitration agreement.--The term
``predispute arbitration agreement'' means an agreement to
arbitrate a dispute that has not yet arisen at the time of the
making of the agreement.
(11) Predispute joint-action waiver.--The term ``predispute
joint-action waiver'' means an agreement, whether or not part
of a predispute arbitration agreement, that would prohibit, or
waive the right of, one of the parties to the agreement to
participate in a joint, class, or collective action in a
judicial, arbitral, administrative, or other forum, concerning
a dispute that has not yet arisen at the time of the making of
the agreement.
(12) Qualified asset or interest.--The term ``qualified
asset or interest'', with respect to a business entity, means
an asset or interest that is--
(A) all or substantially all of the operating
assets and the goodwill of the business entity;
(B) all or substantially all of the operating
assets of a division, or a subsidiary, of the business
entity and the goodwill of that division or subsidiary;
or
(C) all of the ownership interest of any subsidiary
of the business entity.
(13) Sale.--The term ``sale'', with respect to a business
entity, means the sale of the goodwill of the business entity,
the sale or other disposal of all of the ownership interest of
a seller in the business entity, or the sale of a qualified
asset or interest with regard to the business entity.
(14) Seller.--The term ``seller'', with respect to a
business entity, means any person who sells the goodwill of the
business entity, any owner of the business entity selling or
otherwise disposing of all of his or her ownership interest in
the business entity, or any owner of the business entity that
sells a qualified asset or interest with regard to the business
entity.
(15) Senior executive official.--The term ``senior
executive official'', with respect to a sale, means an official
who was acquired as an employee of the buyer in such sale
through the terms and conditions of the sale, and, on the day
before the date of such sale--
(A) who was employed by the seller in such sale;
(B) who was responsible for making or directing
major decisions of the seller; and
(C) whose rate of compensation was in the highest
10 percent of the compensation rates for all employees
of the seller.
(16) Trade secret.--The term ``trade secret'' has the
meaning given the term in section 1839 of title 18, United
States Code.
<all>
Introduced in House
Introduced in House
Referred to the Committee on Energy and Commerce, and in addition to the Committee on Education and the Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Committee on Energy and Commerce, and in addition to the Committee on Education and the Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Subcommittee on Innovation, Data, and Commerce.
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