Proposed Law Would Invalidate Most Non-Compete Agreements

breach of contractA bill currently sitting in committee in the United States Senate would make most non-compete agreements invalid. Known as the Workforce Mobility Act, the bill would broadly prohibit non-compete clauses in employment contracts, with a handful of exceptions. While the bill is currently sitting in committee, if passed, it would have a major impact on employment contracts around the country.

The Workforce Mobility Act, co-sponsored by Senators Todd Young (R-IN) and Chris Murphy (D-CT), would make it illegal for any person to “enter into, enforce, or threaten to enforce a noncompete agreement with any individual who performs work for the person and who in any workweek is engaged in commerce or in the production of goods for commerce.” The only exceptions are as follows:

  • The agreement is part of a sale of goodwill or ownership interest in a business.
  • The agreement is part of a dissolution or disassociation of a business partnership.
  • The agreement is part of a senior executive official’s severance agreement, and the non-compete agreement has a duration no greater than one year.

The bill was proposed for several reasons. First, non-compete agreements have become prolific, to the point where an estimated 1 in 5 workers is covered by one. Second, noncompete agreements are strongly anticompetitive, and not only for the workers bound by them; many employers find it harder to locate employees for high-skilled jobs due to non-compete agreements. Additionally, there are already other means for employers to protect their business interests, such as nondisclosure agreements and trade secret protections, that do not impinge on employee rights or restrain the market.

However, the bill has critics who argue the non-compete agreement is an important tool for business owners to protect themselves and their own business interests. After all, without such restrictions, what will stop an employee from simply taking the skills, knowledge and clientele they’ve developed at one job to another job, or to use it to start their own business on their employer’s dime? It is likely that the bill’s proponents will need to address these criticisms as the bill goes through the legislative process.

The business law attorneys at Blodnick, Fazio & Clark are skilled and knowledgeable in the area of business law and commercial transactions, including indemnification agreements.  With offices conveniently located in Garden City, Nassau County, and Babylon,  Suffolk County, the firm provides high-quality legal care at reasonable prices. If you require legal assistance concerning business startups, formation, corporate acquisitions and mergers, corporate restructuring, or another business matter, call (516) 280-7105 or fill out our contact form for a free consultation.

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