What This Bill Does
This bill prohibits employers and contractors from creating or enforcing noncompete agreements (contracts that stop workers from competing with their former employer after leaving a job) with most employees and workers. The bill allows only a few exceptions for people selling businesses or senior executives during business sales. (Sec. 3)
Who It Affects
- Workers and employees in most industries and job categories
- Employers and contractors who hire people
- The Federal Trade Commission (the agency that polices unfair business practices)
- The Department of Labor (the agency overseeing workplace rules)
- State attorneys general (state law enforcement officials)
- Businesses being bought or sold
Key Provisions
- No employer can require, enforce or attempt to enforce a noncompete agreement with any employee or contractor, with limited exceptions. Any existing noncompete agreement would be void and unenforceable. (Sec. 3(a))
- Employers can still require employees to sign agreements promising not to share trade secrets (confidential business information) even after they leave their job. (Sec. 4)
- Someone selling a business to another person can agree not to compete in a specific geographic area where the business currently operates. (Sec. 3(b)(1)(A))
- When a business is sold, a senior executive (a top employee earning in the highest 10 percent of company pay) who receives a severance agreement (payment for losing their job) can be restricted from competing for up to one year only if paid compensation equal to what they would have earned during that year. (Sec. 3(b)(1)(B))
- Partners dissolving a partnership can agree not to compete in areas where the partnership previously conducted business. (Sec. 3(b)(2))
- Employers must post notice of this law's provisions in a conspicuous location where employees see notices. (Sec. 5(a))
- The Federal Trade Commission enforces this law as an unfair or deceptive business practice. The Department of Labor can also investigate violations and file lawsuits on behalf of workers. (Sec. 6(a) and (b))
- Workers who believe their rights were violated can file their own civil lawsuits in federal court and receive actual damages plus attorney fees if they win. (Sec. 6(e))
- State attorneys general can file lawsuits on behalf of their state residents. (Sec. 6(f))
- No employer can require workers to sign away their right to file a lawsuit or join a class action (a group lawsuit) regarding noncompete violations before a dispute occurs. (Sec. 6(g))
What Changes
If this law passes, employers currently using noncompete agreements with regular employees and workers will no longer be able to enforce them. Only noncompete agreements signed after the law takes effect involving business sales or senior executives with severance packages would remain legal under specific conditions.
The Federal Trade Commission and Department of Labor would gain authority to investigate and punish employers violating this rule. Both agencies would also create systems for workers to report violations.
Important Definitions
- **Noncompete agreement**: A contract that stops a worker from doing similar work for another company for a set period, in a specific location, or for a particular type of business after they leave their job. (Sec. 8(6))
- **Trade secret**: Business information (like customer lists or manufacturing processes) defined in federal law as information that has value because it is not known to competitors. (Sec. 8(16))
- **Senior executive official**: An employee acquired during a business sale who made major company decisions and earned in the top 10 percent of the company's employee pay rates. (Sec. 8(15))
- **Business entity**: A partnership, limited liability company, or corporation. (Sec. 8(1))
- **Goodwill**: The value and reputation of a business beyond its physical assets.
- **Severance agreement**: A contract requiring monetary compensation to an employee if they lose their job as part of a business sale. (Sec. 3(b)(1)(B)(iii))
Effective Date
Not specified in bill text
I
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 Com-
merce, and in addition to the Committee on Education and the Work-
force, 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 Representa-
1
tives of the United States of America in Congress assembled,
2
SECTION 1. SHORT TITLE.
3
This Act may be cited as the ‘‘Workforce Mobility
4
Act of 2023’’.
5
SEC. 2. FINDINGS.
6
Congress finds the following:
7
(1) The proliferation of noncompete agreements
8
throughout sectors, occupational categories, and in-
9
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come brackets is contrary to the commitment of
1
Congress to foster stronger wage growth for workers
2
in the United States. Economists now estimate that
3
1 in 5 workers is covered by a noncompete agree-
4
ment.
5
(2) Noncompete agreements are blunt instru-
6
ments that crudely protect employer interests and
7
place a drag on national productivity by forcing cov-
8
ered workers to either idle for long periods of time
9
or leave the industries in which the workers have
10
honed their skills altogether.
11
(3) Enforceable noncompete agreements also re-
12
duce wages, restrict worker mobility, impinge on the
13
freedom of a worker to maximize labor market po-
14
tential, and slow the pace of innovation in the
15
United States.
16
(4) Employers have access to legal recourses to
17
protect their legitimate interests and property, in-
18
cluding trade secret protections, intellectual property
19
protections, and nondisclosure agreements that do
20
not inflict broad collateral harm on the labor market
21
prospects for workers.
22
(5) Employers that rely on a list or lists of ven-
23
dors, customers, or clients that are not easily ob-
24
tained by an individual through means other than
25
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the work relationship have adequate legal protection
1
through the use of trade secret protections and non-
2
disclosure agreements.
3
(6) Noncompete agreements broadly restrict
4
employment options for workers in the United States
5
when more narrowly targeted remedies are readily
6
available to employers.
7
(7) Fostering an environment where employers
8
can flourish is necessary to promote vitality and
9
prosperity in the economy.
10
(8) Employers may retain critical skilled em-
11
ployees while ensuring that disincentives affecting
12
mobility, including noncompete agreements, do not
13
negatively impact the workforce in the United
14
States.
15
SEC. 3. PROHIBITING NONCOMPETE AGREEMENTS.
16
(a) PROHIBITION.—
17
(1) IN GENERAL.—Except as provided in sub-
18
section (b), no person shall enter into, enforce, or at-
19
tempt to enforce a noncompete agreement with any
20
individual who is employed by, or performs work
21
under contract with, such person with respect to the
22
activities of such person in or affecting commerce.
23
(2) EFFECT OF AGREEMENTS.—Except as pro-
24
vided in subsection (b), a noncompete agreement de-
25
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scribed in paragraph (1) shall have no force or ef-
1
fect.
2
(b) EXCEPTIONS.—
3
(1) SALE OF GOODWILL OR OWNERSHIP INTER-
4
EST.—
5
(A) IN GENERAL.—A seller of a business
6
entity may enter into an agreement with the
7
buyer to refrain from carrying on a like busi-
8
ness within a specified geographic area de-
9
scribed in subparagraph (C), if the buyer, or
10
any person deriving title to the goodwill of the
11
business entity or an ownership interest in the
12
business entity from the buyer, carries on a like
13
business in such specified geographic area.
14
(B) SENIOR EXECUTIVE OFFICIALS WITH
15
SEVERANCE AGREEMENTS.—
16
(i) IN
GENERAL.—Subject to clause
17
(ii), a buyer or seller of a business entity
18
may enter into a noncompete agreement
19
with a senior executive official who has a
20
severance agreement described in clause
21
(iii) that restricts the senior executive offi-
22
cial from performing, within a specified ge-
23
ographic area described in subparagraph
24
(C), any work that is similar to the work
25
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•HR 731 IH
that the senior executive official performed
1
for the buyer or seller, if the buyer, or any
2
person deriving title to the goodwill of the
3
business entity or an ownership interest in
4
the business entity from the buyer, carries
5
on a like business in such specified geo-
6
graphic area.
7
(ii) TIME-LIMITED
AGREEMENT.—A
8
noncompete agreement described in clause
9
(i) may not restrict the senior executive of-
10
ficial as described in such clause for a pe-
11
riod that is more than one year.
12
(iii)
SEVERANCE
AGREEMENT.—A
13
severance agreement described in this
14
clause is an agreement between the buyer
15
or seller of a business entity and a senior
16
executive official that—
17
(I) is part of the terms and con-
18
ditions of the sale; and
19
(II) requires monetary compensa-
20
tion for the senior executive official in
21
the event of termination of the em-
22
ployment of the senior executive offi-
23
cial at an amount that is not less than
24
the compensation that the senior exec-
25
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•HR 731 IH
utive official is or would be reasonably
1
expected to receive from the buyer
2
during the 1-year period following the
3
sale.
4
(C) SPECIFIED
GEOGRAPHIC
AREA.—A
5
specified geographic area described in this sub-
6
paragraph is a geographic area—
7
(i) that is specified in an agreement
8
described in subparagraph (A), or a non-
9
compete agreement described in subpara-
10
graph (B), regarding a business entity;
11
and
12
(ii) in which such business entity, in-
13
cluding any division or subsidiary of such
14
business entity, conducted business prior
15
to the agreement or noncompete agree-
16
ment.
17
(2) PARTNERSHIP
DISSOLUTION
OR
DISASSO-
18
CIATION.—
19
(A) IN GENERAL.—Any partner of a part-
20
nership may enter into an agreement with any
21
other member of the partnership that, upon the
22
dissolution of the partnership or dissociation of
23
the partner from such partnership, the partner
24
will refrain from carrying on a like business
25
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•HR 731 IH
within a specified geographic area described in
1
subparagraph (B), if any other member of the
2
partnership, or any person deriving title to the
3
partnership or the goodwill of the partnership
4
from any other member of the partnership, car-
5
ries on a like business in such specified geo-
6
graphic area.
7
(B) SPECIFIED
GEOGRAPHIC
AREA.—A
8
specified geographic area described in this sub-
9
paragraph is a geographic area—
10
(i) that is specified in an agreement
11
described in subparagraph (A); and
12
(ii) in which any business of the part-
13
nership has been transacted prior to the
14
agreement.
15
SEC. 4. TRADE SECRETS.
16
Nothing in this Act shall preclude a person from en-
17
tering into an agreement with an individual who is em-
18
ployed by, or performs work under contract with, such per-
19
son with respect to the activities of such person in or af-
20
fecting commerce to not disclose any information (includ-
21
ing after the individual is no longer employed or per-
22
forming work for the person) regarding the person, or the
23
work performed by the individual for the person, that is
24
a trade secret.
25
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SEC. 5. NOTICE; PUBLIC AWARENESS CAMPAIGN.
1
(a) NOTICE.—Any person who engages an individual
2
who is employed by, or performs work under contract with,
3
such person with respect to the activities of such person
4
in or affecting commerce shall post and maintain notice
5
of the provisions of this Act—
6
(1) in a conspicuous place on the premises of
7
such person; or
8
(2) in a conspicuous place where notices to em-
9
ployees and applicants for employment are custom-
10
arily posted physically or electronically by such per-
11
son.
12
(b) PUBLIC AWARENESS CAMPAIGN.—The Secretary
13
of Labor may carry out activities to make the public aware
14
of the provisions of this Act.
15
SEC. 6. ENFORCEMENT.
16
(a) FEDERAL TRADE COMMISSION.—
17
(1) UNFAIR
OR
DECEPTIVE
ACTS
OR
PRAC-
18
TICES.—A violation of section 3 or 5(a) shall be
19
treated as a violation of a rule defining an unfair or
20
deceptive act or practice prescribed under section
21
18(a)(1)(B) of the Federal Trade Commission Act
22
(15 U.S.C. 57a(a)(1)(B)).
23
(2) POWERS OF COMMISSION.—
24
(A) IN
GENERAL.—The Federal Trade
25
Commission shall enforce sections 3 and 5(a) in
26
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•HR 731 IH
the same manner, by the same means, and with
1
the same jurisdiction, powers, and duties as
2
though all applicable terms and provisions of
3
the Federal Trade Commission Act (15 U.S.C.
4
41 et seq.) were incorporated into and made a
5
part of this Act.
6
(B) PRIVILEGES
AND
IMMUNITIES.—Any
7
person who violates section 3 or 5(a) shall be
8
subject to the penalties and entitled to the
9
privileges and immunities provided in the Fed-
10
eral Trade Commission Act (15 U.S.C. 41 et
11
seq.).
12
(C) AUTHORITY PRESERVED.—Nothing in
13
this Act shall be construed to limit the author-
14
ity of the Federal Trade Commission under any
15
other provision of law.
16
(b) DEPARTMENT OF LABOR.—
17
(1) IN GENERAL.—The Secretary of Labor—
18
(A) shall investigate as the Secretary de-
19
termines necessary to determine violations of
20
section 3 or 5(a) by an employer; and
21
(B) may, subject to paragraph (2), bring
22
an action in any court of competent jurisdiction
23
to obtain the legal or equitable relief against an
24
employer on behalf of an individual aggrieved
25
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•HR 731 IH
by the violation as may be appropriate to effec-
1
tuate the purposes of such sections.
2
(2) STATUTE OF LIMITATIONS.—An action de-
3
scribed in paragraph (1)(B) may not be commenced
4
later than 4 years after the date on which the viola-
5
tion occurred.
6
(3) REGULATIONS.—Not later than 18 months
7
after the date of enactment of this Act, the Sec-
8
retary of Labor, in consultation with the Chair of
9
the Federal Trade Commission, shall issue regula-
10
tions as necessary to carry out this Act, including
11
with respect to the authority of the Secretary of
12
Labor to enforce violations of section 3 or 5(a) in
13
accordance with paragraph (1).
14
(c) STANDARDS
FOR DUAL ENFORCEMENT.—Not
15
later than 1 year after the date of enactment of this Act,
16
the Federal Trade Commission and the Secretary of Labor
17
shall, for the purposes of enforcing this Act—
18
(1) develop shared standards for consistent en-
19
forcement; and
20
(2) identify the scope of responsibility of the
21
Federal Trade Commission and such scope of the
22
Secretary of Labor to ensure complementary en-
23
forcement of this Act.
24
(d) REPORTING VIOLATIONS.—
25
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(1) IN GENERAL.—The Federal Trade Commis-
1
sion and the Secretary of Labor shall each establish
2
a system to receive complaints by individuals regard-
3
ing alleged violations of section 3.
4
(2) CONFIDENTIALITY.—Except as otherwise
5
required by law, the Federal Trade Commission and
6
the Secretary of Labor may not disclose the identity
7
or identifying information of any individual pro-
8
viding a complaint under paragraph (1), without ex-
9
plicit consent from the individual.
10
(e) PRIVATE RIGHT OF ACTION.—
11
(1) IN
GENERAL.—An individual who is ag-
12
grieved by a violation of this Act may bring a civil
13
action in any appropriate district court of the
14
United States.
15
(2) RELIEF.—In a civil action under paragraph
16
(1), a court may award—
17
(A) any actual damages sustained by the
18
individual as a result of the violation; and
19
(B) in the case of any successful action,
20
the costs of the action and reasonable attor-
21
ney’s fees, as determined by the court.
22
(f) ENFORCEMENT BY STATES.—
23
(1) IN GENERAL.—In any case in which the at-
24
torney general of a State has reason to believe that
25
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•HR 731 IH
an interest of the residents of the State has been or
1
is threatened or adversely affected by any person
2
who violates any provision of section 3 or 5(a) or
3
any rule promulgated under this Act to carry out
4
such section, the attorney general of the State, as
5
parens patriae, may bring a civil action on behalf of
6
the residents of the State in an appropriate State
7
court or an appropriate district court of the United
8
States to—
9
(A) enjoin any further such violation by
10
the person;
11
(B) compel compliance with section 3 or
12
5(a) or any such rule;
13
(C) obtain a permanent, temporary, or pre-
14
liminary injunction;
15
(D) obtain damages, restitution, or other
16
compensation on behalf of the residents of the
17
State; or
18
(E) obtain any other appropriate equitable
19
relief.
20
(2) PRESERVATION OF STATE POWERS.—Noth-
21
ing in this subsection shall be construed as altering,
22
limiting, or affecting the authority of the attorney
23
general of a State to—
24
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[Text truncated for display. Full text available on Congress.gov.]