By now you are no doubt aware that last month the Federal Trade Commission proposed a new rule prohibiting employers from enforcing noncompete agreements against their workers. The FTC has received over 5,300 comments on the proposed rule in the past three weeks. On Wednesday a bipartisan group of U.S. Senators reintroduced the Workforce Mobility Act, which would also limit the use of non-compete agreements.
Generally, the WMA would:
- Narrow the use of non-compete agreements to include only instances of a dissolution of a partnership or the sale of a business;
- Require employers to make their employees aware of the limitation on non-competes; and
- Require the Federal Trade Commission and the Department of Labor to submit a report to Congress on any enforcement actions taken.
The WMA creates a private cause of action that would allow victims of an illegal noncompete to recover their actual damages and attorney’s fees and costs. Pre-dispute arbitration agreements and waivers of joint/collective actions would not be enforceable in the context of a claim under the WMA. The FTC’s proposed rule does not create a private cause of action.
Unlike the FTC’s proposed rule, the WMA would not impact in-place non-compete agreements. Meaning that if you implement a non-compete agreement before the WMA becomes law, if it does so, your non-compete will remain effective, so long as the FTC’s proposed rule does not also become law.