On October 16, Senators Chris Murphy (D-Conn.) and Todd Young (R-Ind.) introduced a bill that would limit the use of non-compete agreements by employers. The bill, according to Senator Young, would “empower our workers and entrepreneurs so they can freely apply their talents where their skills are in greatest demand.”
The bipartisan bill has been introduced and would limit the use of non-compete agreements to the dissolution of partnerships or the sale of a business.
- Limit the use of non-compete agreements to dissolution of a partnership or the sale of a business.
- Place enforcement authority with the Federal Trade Commission and Department of Labor.
- Create a private right of action for affected employees.
- Impose notification requirements on employers.
- Require the FTC and DOL to submit a report to Congress on enforcement actions.
According to the sponsors’ press release, 40% of American workers have been subject to a non-compete agreement at some point in their careers, and in states in which non-competes are enforced, new businesses are more likely to fail in their first three years compared to states where they are not enforced.
The bill was introduced several months after the senators sent bipartisan letter to the GAO calling for an investigation into the use of non-compete agreements, especially in low-wage occupations, and the effects of non-compete agreements on employment, wages and benefits, innovation, and entrepreneurship.
The proposed legislation has already received the predictable praise and consternation across the political spectrum. We have discussed the issue of non-compete agreements in past client advisories, but for information on more recent developments, please contact Peter Bennett (firstname.lastname@example.org) or Rick Finberg (email@example.com) of The Bennett Law Firm.