Earlier this year, Senators introduced Senate Bill 2782, dubbed the “Workforce Mobility Act,” with an identical bill in the House (H. R. 5631). The proposed act would make it illegal for any employer “engaged in commerce or in the production of goods for commerce” to “enter into, enforce, or threaten to enforce a covenant not to compete …” “Commerce” is given the same definition as is provided for in the Fair Labor Standards Act (“‘Commerce’ means trade, commerce, transportation, transmission, or communication among the several States or between any State and any place outside thereof.”). “Covenant not to compete” is defined as an agreement between an employer and an employee, that restricts such employee from performing, (1) any work for another employer for a specified period of time; (2) any work in a specified geographical area; or (3) any work for another employer that is similar to such employee’s work for the employer that is a party to such agreement.
The bill attempts to offer a solution to the wide-spread concern that non-competes have been abusively enforced against low-wage workers and have prevented them from seeking other, higher-paying jobs. However, the overbreadth of the bill provides concerns for the potential legitimate benefits that non-competes provide to employers. Non-competes can be very valuable tools when trying to prevent a company’s confidential information and trade secrets from being utilized by competitors. Such concerns exist particularly with executives and other high-level employees privy to a company’s most valuable proprietary information, including client information and strategic plans.
The Workforce Mobility Act, however, does not differentiate between lower-level employees and high-level executives. Moreover, it does not distinguish between those employees who are actually exposed to trade secrets or confidential information. Thus, the expansiveness of the bill seems to unnecessarily overlook the legitimate assurances and protections that non-competes offer to businesses looking to protect their assets
Additionally, the Workforce Mobility Act may have the effect of prohibiting other legitimate restrictive covenants. A covenant not to compete, under the bill, is defined broadly to include “any work for another employer for a specified period of time…” The definition could arguably be construed to include non-solicitation and non-disclosure agreements with similar goals of protecting a company’s interests in its proprietary information. The bill’s vagueness could create further complications and potential for litigation in the future
Furthermore, a bill introduced in 2015, dubbed the “Mobility and Opportunity for Vulnerable Employees Act,” provided for a similar prohibition on non-competes for employees making less than $15 an hour. Despite this more narrowly-tailored restriction, this bill failed to garner enough support to pass.
Courts’ tendencies to uphold non-competes have varied from jurisdiction to jurisdiction. However, courts have tended to find valid interests in upholding non-competes where employees have actually had access to trade secrets and confidential information, where employees have been higher-ups and have been highly compensated, and where employees have actually engaged in misconduct or have actually misappropriated confidential information.
What Does This Mean?
Because of the above considerations, it is difficult to envision Congress imposing a blanket ban on all covenants not to compete. It is still important, though, to be familiar with the varying case law in each jurisdiction to assess the likelihood of a restrictive covenant being upheld. Consulting with a lawyer in drafting your company’s employment agreement or determining whether you have been adversely impacted by an overly broad non-compete is an important step in evaluating and protecting your rights as an employer or employee.