What This Bill Does
This bill changes federal employment law to ban non-compete agreements, which are contracts that prevent workers from taking jobs with other companies after leaving their employer. The bill makes all existing non-compete agreements invalid and prevents employers from creating new ones going forward.
Who It Affects
* Employees in non-exempt positions (workers who are eligible for overtime pay under federal law)
* Employers who use or try to enforce non-compete agreements
* The Department of Labor (the agency that enforces federal labor laws)
Key Provisions
* Non-compete agreements entered into before this law passes become void and have no legal effect, and employers cannot enforce or threaten to enforce them (Sec. 2(b)(1))
* Starting when this law takes effect, employers cannot create, extend or renew non-compete agreements with employees (Sec. 2(b)(2))
* Employers can still require employees to keep trade secrets confidential, meaning information that qualifies as a trade secret under federal law (Sec. 2(c))
* Employers who violate this law face legal penalties and must pay appropriate legal or financial relief to employees harmed by the violation (Sec. 2(b)(2))
What Changes
If this becomes law, workers would no longer face restrictions on where they can work after leaving a job, with limited exceptions. Employers would lose the ability to prevent employees from working for competitors or in specific geographic areas.
Important Definitions
* Non-compete agreement: A contract between employer and employee that prevents the worker from working for another company, in a specific geographic area, or doing similar work for a rival employer after employment ends (Sec. 2(a))
* Trade secret: Information protected under federal law that has independent economic value because it is not generally known (Sec. 2(c))
Effective Date
This law takes effect 180 days after it is signed by the President (Sec. 2(d)(1)).
II
118TH CONGRESS
1ST SESSION
S. 379
To amend the Fair Labor Standards Act of 1938 to prevent employers
from using non-compete agreements in employment contracts for certain
non-exempt employees.
IN THE SENATE OF THE UNITED STATES
FEBRUARY 9, 2023
Mr. RUBIO (for himself and Ms. HASSAN) introduced the following bill; which
was read twice and referred to the Committee on Health, Education,
Labor, and Pensions
A BILL
To amend the Fair Labor Standards Act of 1938 to prevent
employers from using non-compete agreements in em-
ployment contracts for certain non-exempt employees.
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 ‘‘Freedom To Compete
4
Act of 2023’’.
5
SEC. 2. LIMITATION ON NON-COMPETE AGREEMENTS.
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(a) IN GENERAL.—The Fair Labor Standards Act of
7
1938 (29 U.S.C. 201 et seq.) is amended by inserting
8
after section 7 the following:
9
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•S 379 IS
‘‘SEC. 8. LIMITATION ON NON-COMPETE AGREEMENTS.
1
‘‘(a) DEFINITION OF NON-COMPETE AGREEMENT.—
2
In this section, the term ‘non-compete agreement’ means
3
an agreement, entered into between an employer and an
4
employee, that restricts such employee from performing,
5
after the employment relationship between the employer
6
and the employee terminates, any of the following:
7
‘‘(1) Any work for another employer for a speci-
8
fied period of time.
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‘‘(2) Any work in a specified geographical area.
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‘‘(3) Any work for another employer that is
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similar to such employee’s work for the employer
12
that is a party to such agreement.
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‘‘(b) IN GENERAL.—
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‘‘(1) NO
ENFORCEMENT
OF
NON-COMPETE
15
AGREEMENTS.—Any non-compete agreement entered
16
into before the date of enactment of the Freedom To
17
Compete Act of 2023 shall be void and have no ef-
18
fect. An employer shall not enforce, or threaten to
19
enforce, any non-compete agreement with an em-
20
ployee.
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‘‘(2) NO NEW NON-COMPETE AGREEMENTS.—
22
Beginning on the date of enactment of the Freedom
23
To Compete Act of 2023, an employer shall not
24
enter into, extend, or renew any non-compete agree-
25
ment with an employee.
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•S 379 IS
‘‘(3) LIMIT
ON
APPLICABILITY.—This sub-
1
section shall not apply with respect to any employee
2
described in section 13(a)(1).
3
‘‘(c) RULE OF CONSTRUCTION REGARDING TRADE
4
SECRETS.—Nothing in this section shall preclude an em-
5
ployer from entering into an agreement with an employee
6
to not share any information (including after the employee
7
is no longer employed by the employer) regarding the em-
8
ployer or the employment that is a trade secret, as defined
9
in section 1839 of title 18, United States Code.’’.
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(b) ENFORCEMENT.—
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(1) PROHIBITED
ACT.—Section 15(a) of the
12
Fair Labor Standards Act of 1938 (29 U.S.C.
13
215(a)) is amended—
14
(A) in paragraph (5), by striking ‘‘and’’;
15
(B) in paragraph (6), by striking the pe-
16
riod at the end and inserting ‘‘; and’’; and
17
(C) by adding at the end the following:
18
‘‘(7) to violate any of the provisions of section
19
8.’’.
20
(2) PENALTIES.—Section 16 of the Fair Labor
21
Standards Act of 1938 (29 U.S.C. 216) is amend-
22
ed—
23
(A) in subsection (a), by inserting ‘‘, ex-
24
cept that a person convicted of a violation of
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•S 379 IS
section 15(a)(7) shall not be subject to impris-
1
onment’’ after ‘‘or both’’;
2
(B) in subsection (b), by inserting ‘‘Any
3
employer who violates the provisions of section
4
8 shall be liable for such legal or equitable relief
5
as may be appropriate to effectuate the pur-
6
poses of such section.’’ after the third sentence;
7
(C) in subsection (c), by adding at the end
8
the following: ‘‘The authority and requirements
9
described in this subsection shall also apply
10
with respect to a violation of section 8, as ap-
11
propriate, and the employer shall be liable for
12
such legal or equitable relief as may be appro-
13
priate to effectuate the purposes of such sec-
14
tion.’’; and
15
(D) in subsection (e)(2), by striking ‘‘sec-
16
tion 6 or 7, relating to wages,’’ and inserting
17
‘‘section 6, 7, or 8, relating to wages or non-
18
compete agreements,’’.
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(c) CONFORMING AMENDMENT.—Section 10 of the
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Fair Labor Standards Act of 1938 (29 U.S.C. 210) is re-
21
pealed.
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(d) EFFECTIVE DATE.—
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•S 379 IS
(1) IN GENERAL.—The amendments made by
1
this Act shall take effect 180 days after the date of
2
enactment of this Act.
3
(2) APPLICABILITY.—This Act, and the amend-
4
ments made by this Act, shall apply with respect to
5
any dispute or claim for which proceedings com-
6
menced on or after the effective date described in
7
paragraph (1).
8
Æ
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