Workforce Mobility Act of 2020

I 116TH CONGRESS 2D SESSION H. R. 5710 To prohibit certain noncompete agreements, and for other purposes. IN THE HOUSE OF REPRESENTATIVES JANUARY 29, 2020 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 Labor, 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 com- mittee 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 2020’’. 5 SEC. 2. FINDINGS. 6 Congress finds the following: 7 (1) The proliferation of noncompete agreements 8 throughout sectors, occupational categories, and in- 9 VerDate Sep 11 2014 00:17 Feb 01, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H5710.IH H5710 pbinns on DSKBC47HB2PROD with BILLS 2 •HR 5710 IH come brackets is contrary to Congress’s commitment 1 to fostering stronger wage growth for workers in the 2 United States. Economists now estimate that 1 in 5 3 workers is covered by a noncompete agreement. 4 (2) Noncompete agreements are blunt instru- 5 ments that crudely protect employer interests and 6 place a drag on national productivity by forcing cov- 7 ered workers to either idle for long periods of time 8 or leave the industries where they have honed their 9 skills altogether. 10 (3) Enforceable noncompete agreements also re- 11 duce wages, restrict worker mobility, impinge on 12 worker freedoms to maximize their labor market po- 13 tential, and slow the pace of American innovation. 14 (4) Employers have access to legal recourses to 15 protect their legitimate interests and property, in- 16 cluding trade secret protections, intellectual property 17 protections, and nondisclosure agreements that do 18 not inflict broad collateral harm on workers’ labor 19 market prospects. 20 (5) Employers that rely on a list or lists of ven- 21 dors, customers, or clients that are not easily ob- 22 tained by an individual through means other than 23 the work relationship have adequate legal protection 24 VerDate Sep 11 2014 00:17 Feb 01, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H5710.IH H5710 pbinns on DSKBC47HB2PROD with BILLS 3 •HR 5710 IH through the use of trade secrets protections and 1 nondisclosure agreements. 2 (6) Noncompete agreements broadly restrict 3 employment options for workers in the United States 4 when more narrowly targeted remedies are readily 5 available to employers. 6 (7) Fostering an environment where employers 7 can flourish is necessary to promote vitality and 8 prosperity in the economy. 9 (8) Employers may retain critical skilled em- 10 ployees while ensuring that disincentives affecting 11 mobility, including noncompete agreements, do not 12 negatively impact the workforce in the United 13 States. 14 SEC. 3. PROHIBITING NONCOMPETE AGREEMENTS. 15 (a) PROHIBITION.— 16 (1) IN GENERAL.—Except as provided in sub- 17 section (b), no person shall enter into, enforce, or 18 threaten to enforce a noncompete agreement with 19 any individual who performs work for the person 20 and who in any workweek is engaged in commerce 21 or in the production of goods for commerce (or is 22 employed in an enterprise engaged in commerce or 23 in the production of goods for commerce). 24 VerDate Sep 11 2014 00:17 Feb 01, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H5710.IH H5710 pbinns on DSKBC47HB2PROD with BILLS 4 •HR 5710 IH (2) EFFECT OF AGREEMENTS.—Except as pro- 1 vided in subsection (b), a noncompete agreement de- 2 scribed in paragraph (1) shall have no force or ef- 3 fect. 4 (b) EXCEPTIONS.— 5 (1) SALE OF GOODWILL OR OWNERSHIP INTER- 6 EST.— 7 (A) IN GENERAL.—Any person who sells 8 the goodwill of a business, any owner of a busi- 9 ness entity selling or otherwise disposing of all 10 of his or her ownership interest in the business 11 entity, or any owner of a business entity that 12 sells an asset or interest as described in sub- 13 paragraph (B), may enter into an agreement 14 with the buyer to refrain from carrying on a 15 like business within a specified geographic area 16 described in subparagraph (C), if the buyer, or 17 any person deriving title to the goodwill or own- 18 ership interest from the buyer, carries on a like 19 business in such specified geographic area. 20 (B) ASSET OR INTEREST.—An asset or in- 21 terest described in this subparagraph is— 22 (i) all or substantially all of the oper- 23 ating assets and the goodwill of the busi- 24 ness entity; 25 VerDate Sep 11 2014 00:17 Feb 01, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H5710.IH H5710 pbinns on DSKBC47HB2PROD with BILLS 5 •HR 5710 IH (ii) all or substantially all of the oper- 1 ating assets of a division, or a subsidiary, 2 of the business entity and the goodwill of 3 that division or subsidiary; or 4 (iii) all of the ownership interest of 5 any subsidiary of the business entity. 6 (C) SPECIFIED GEOGRAPHIC AREA.—A 7 specified geographic area described in this sub- 8 paragraph is a geographic area specified in the 9 agreement described in subparagraph (A), or 10 (D) as applicable, where the business, business 11 entity, division, or subsidiary sold as the subject 12 of such agreement, has conducted business 13 prior to the agreement. 14 (D) SENIOR EXECUTIVE OFFICIALS WITH 15 SEVERANCE AGREEMENTS.— 16 (i) IN GENERAL.—Any buyer or seller 17 described in subparagraph (A) may enter 18 into an agreement with a senior executive 19 official who has a severance agreement de- 20 scribed in clause (iii) for the senior execu- 21 tive official to refrain from carrying on a 22 like business within a specified geographic 23 area described in subparagraph (C), if the 24 buyer, or any person deriving title to the 25 VerDate Sep 11 2014 00:17 Feb 01, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H5710.IH H5710 pbinns on DSKBC47HB2PROD with BILLS 6 •HR 5710 IH goodwill or ownership interest from the 1 buyer, carries on a like business in such 2 specified geographic area. 3 (ii) TIME-LIMITED AGREEMENT.—An 4 agreement described in clause (i) may not 5 require the senior executive official to re- 6 frain from carrying on a like business as 7 described in such clause for a period that 8 is greater than one year. 9 (iii) SEVERANCE AGREEMENT.—A 10 severance agreement described in this 11 clause is an agreement between the buyer 12 and the senior executive official, or an 13 agreement between the seller and the sen- 14 ior executive official, described in clause (i) 15 that— 16 (I) is part of the terms and con- 17 ditions of the sale; and 18 (II) requires monetary compensa- 19 tion for the senior executive official in 20 the event of termination of the em- 21 ployment of the senior executive offi- 22 cial at an amount that is greater than 23 or equal to the compensation the offi- 24 cial is reasonably expected to receive 25 VerDate Sep 11 2014 00:17 Feb 01, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H5710.IH H5710 pbinns on DSKBC47HB2PROD with BILLS 7 •HR 5710 IH from the buyer during the 1-year pe- 1 riod following the sale. 2 (E) DEFINITIONS.— 3 (i) BUYER, SALE, SELLER.—For pur- 4 poses of this paragraph— 5 (I) the term ‘‘buyer’’ means, as 6 described in subparagraph (A), any 7 person who buys the goodwill of a 8 business, buys or otherwise acquires 9 ownership interest in a business enti- 10 ty, or buys an asset or interest as de- 11 scribed in subparagraph (B); 12 (II) the term ‘‘sale’’ means, as 13 described in subparagraph (A), the 14 sale of the goodwill of a business, the 15 sale or other disposal of all of the 16 ownership interest of the seller in a 17 business entity, or the sale of an asset 18 or interest as described in subpara- 19 graph (B); and 20 (III) the term ‘‘seller’’ means, as 21 described in subparagraph (A), any 22 person who sells the goodwill of a 23 business, any owner of a business en- 24 tity selling or otherwise disposing of 25 VerDate Sep 11 2014 00:17 Feb 01, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H5710.IH H5710 pbinns on DSKBC47HB2PROD with BILLS 8 •HR 5710 IH all of his or her ownership interest in 1 the business entity, or any owner of a 2 business entity that sells an asset or 3 interest as described in subparagraph 4 (B). 5 (ii) SENIOR EXECUTIVE OFFICIAL.— 6 For purposes of subparagraph (D), the 7 term ‘‘senior executive official’’ means an 8 official who was acquired as an employee 9 of the buyer through the terms and condi- 10 tions of the sale, and, on the day before 11 the date of such sale— 12 (I) who was employed by the sell- 13 er; 14 (II) who had an integral role in 15 the senior executive management team 16 of the seller; 17 (III) who was responsible for 18 making or directing major decisions of 19 the seller; and 20 (IV) whose rate of compensation 21 was in the highest 10 percent of the 22 compensation rates for all employees 23 of the seller. 24 VerDate Sep 11 2014 00:17 Feb 01, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H5710.IH H5710 pbinns on DSKBC47HB2PROD with BILLS 9 •HR 5710 IH (2) PARTNERSHIP DISSOLUTION OR DISASSO- 1 CIATION.— 2 (A) IN GENERAL.—Any partner may, upon 3 or in anticipation of any circumstance described 4 in subparagraph (B), enter into an agreement 5 with any other member of the partnership that 6 the partner will not carry on a like business 7 within a specified geographic area described in 8 subparagraph (C), if any other member of the 9 partnership, or any person deriving title to the 10 business or the goodwill of the business from 11 any other member of the partnership, carries on 12 a like business in such specified geographic 13 area. 14 (B) CIRCUMSTANCES.—A circumstance de- 15 scribed in this subparagraph is either of the fol- 16 lowing: 17 (i) A dissolution of the partnership. 18 (ii) Dissociation of the partner from 19 the partnership. 20 (C) SPECIFIED GEOGRAPHIC AREA.—A 21 specified geographic area described in this sub- 22 paragraph is a geographic area specified in the 23 agreement described in subparagraph (A) where 24 VerDate Sep 11 2014 00:17 Feb 01, 2020 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H5710.IH H5710 pbinns on DSKBC47HB2PROD with BILLS 10 •HR 5710 IH any business of the partnership has been trans- 1 acted prior to the agreement. 2 SEC. 4. TRADE SECRETS. 3 Nothing in this Act shall preclude a person from en- 4 tering into an agreement with an individual working for 5 the person to not share any information (including after 6 the individual is no longer working for the person) regard- 7 ing the person, or the work performed by the individual 8 for the person, that is a trade secret. 9 SEC. 5. NOTICE; PUBLIC AWARENESS CAMPAIGN. 10 (a) NOTICE.—Any person who engages an individual 11 who performs work for the person in commerce or in the 12 production of goods for commerce (or employs an indi- 13 vidual in an enterprise engaged in commerce or in the pro- 14 duction of goods for commerce) shall post notice of the 15 provisions of this Act in a conspicuous place on the prem- 16 ises of such person. 17 (b) PUBLIC AWARENESS CAMPAIGN.—The Secretary 18 of Labor may carry out activities to make the public aware 19 of the provisions of this Act. 20 SEC. 6. ENFORCEMENT. 21 (a) FEDERAL TRADE COMMISSION.— 22 (1) UNFAIR OR DECEPTIVE ACTS OR PRAC- 23 TICES.—A violation of section 3 or 5(a) shall be 24 treated as a violation of a rule defining an unfair or 25 VerDate Sep 11 2014 00:17 Feb 01, 2020 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H5710.IH H5710 pbinns on DSKBC47HB2PROD with BILLS 11 •HR 5710 IH deceptive act or practice prescribed under section 1 18(a)(1)(B) of the Federal Trade Commission Act 2 (15 U.S.C. 57a(a)(1)(B)). 3 (2) POWERS OF COMMISSION.— 4 (A) IN GENERAL.—The Federal Trade 5 Commission shall enforce sections 3 and 5(a) in 6 the same manner, by the same means, and with 7 the same jurisdiction, powers, and duties as 8 though all applicable terms and provisions of 9 the Federal Trade Commission Act (15 U.S.C. 10 41 et seq.) were incorporated into and made a 11 part of this Act. 12 (B) PRIVILEGES AND IMMUNITIES.—Any 13 person who violates section 3 or 5(a) shall be 14 subject to the penalties and entitled to the 15 privileges and immunities provided in the Fed- 16 eral Trade Commission Act (15 U.S.C. 41 et 17 seq.). 18 (b) DEPARTMENT OF LABOR.— 19 (1) IN GENERAL.—The Secretary of Labor— 20 (A) shall receive and investigate a com- 21 plaint of a violation of section 3 or 5(a), if the 22 person in violation of such section is an em- 23 ployer of one or more employees; and 24 VerDate Sep 11 2014 00:17 Feb 01, 2020 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H5710.IH H5710 pbinns on DSKBC47HB2PROD with BILLS 12 •HR 5710 IH (B) may bring an action in any court of 1 competent jurisdiction to obtain the legal or eq- 2 uitable relief against the person described in 3 subparagraph (A) on behalf of an individual ag- 4 grieved by the violation as may be appropriate 5 to effectuate the purposes of such sections, sub- 6 ject to paragraph (2). 7 (2) CIVIL FINES.—In an action described in 8 paragraph (1)(B), the court of competent jurisdic- 9 tion described in such paragraph shall impose a civil 10 fine on any person described in paragraph (1)(A) 11 who violates section 3 or 5(a), in an amount not to 12 exceed $5,000 for each week the person is in such 13 violation. Such fine shall be paid to the individual 14 aggrieved by such violation. 15 (3) REGULATIONS.—Not later than 180 days 16 after the date of enactment of this Act, the Sec- 17 retary of Labor shall issue regulations with respect 18 to the authority of the Secretary in enforcing viola- 19 tions of section 3 or 5(a) in accordance with this 20 subsection. 21 (c) STANDARDS FOR DUAL ENFORCEMENT.—Not 22 later than 90 days after the date of enactment of this Act, 23 the Federal Trade Commission and the Secretary of Labor 24 shall, for the purposes of enforcing this Act— 25 VerDate Sep 11 2014 00:17 Feb 01, 2020 Jkt 099200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H5710.IH H5710 pbinns on DSKBC47HB2PROD with BILLS 13 •HR 5710 IH (1) develop shared standards for consistent en- 1 forcement; and 2 (2) identify the scope of responsibility of the 3 Federal Trade Commission and such scope of the 4 Secretary of Labor to ensure complementary en- 5 forcement of this Act. 6 (d) P [Text truncated for display. 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