Non-Compete Agreements Continue to be Target of Legislation

Connecticut Employment Law Blog

It’s been a while since I talked about federal employment law legislation — in part because nothing ever seems to pass Congress nowadays.  It wasn’t that long ago, that Congress passed the ADA Amendments Act (10+ years).  But it feels like a lot longer than that.

So enter Connecticut Senator Chris Murphy.  Last Friday, he held a news conference to push a new bill that he is co-sponsoring with Republican Senator Todd Young of Indiana.

The bill – according to press reports — would ban non-competes everywhere.  While the Congressional website on bills doesn’t yet have it up, I did find a copy here.

According the Senators, the bill would do the following:

  • Narrow the use of non-compete agreements to include only necessary instances of a dissolution of a partnership or the sale of a business.
  • Place the enforcement responsibility on the Federal Trade Commission and the Department of Labor, as well as a private right of action.
  • Require employers to make their employees aware of the limitation on non-competes, as studies have found that non-competes are often used even when they are illegal or unenforceable. The Department of Labor would also be given the authority to make the public aware of the limitation.
  • Require the Federal Trade Commission and the Department of Labor to submit a report to Congress on any enforcement actions taken.

The bill would, at its core, create a massive new way for the federal courts to be involved in employment cases.  For that reason alone, I suspect this bill is DOA.

BUT, the bill highlights a trend that has been increasing of late, that is — the attack on non-compete agreements.

Even in Connecticut, which has long-resisted a broad ban on them, there have been signs that the wall has begun to crack. A few years ago, the legislature banned non-compete agreements for physicians.  And this past session, a ban on non-competes for home health care workers passed.

For employers, the time is ripe to think about a new strategy going forward. That strategy may focus on protection of confidential information and specific non-solicitation clauses.  Regardless, the time of using non-compete agreements broadly may be coming to an end soon.