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HR Policy Urges Lawmakers to Avoid a Ban on Noncompete Agreements

The Association sent a communication to key lawmakers discouraging them from pursuing any legislative proposal that would broadly prohibit the use of noncompetes in employment agreements.  

Legislation to ban noncompete agreements in the employment context, the Workforce Mobility Act (S. 483/H.R. 1367), has already been introduced, but no congressional action has been taken to date. In the meantime, the Federal Trade Commission (FTC) is expected to propose rules regarding the use of noncompete agreements later this year.  

In anticipation of legislative action, the Association sent a letter to the Senate Committee on Health, Education, Labor, and Pensions (HELP Committee), the House Energy and Commerce Subcommittee on Consumer Protection and Commerce, and House Education and Labor Committee on the legitimate business use of noncompete agreements, especially as it relates to executives and employees with access to proprietary and sensitive information. The Association’s letter additionally addressed misconceptions on the use of noncompete agreements, including that they limit employee mobility, that such agreements are widely used for low- and middle-income employees, and that employers can adequately protect themselves through “trade secret” agreements without the use of noncompetes.  

Meanwhile, state laws regulating noncompete agreements are becoming more prevalent. Most recently, Colorado passed a bill to restrict the use of noncompete agreements, which is expected to be signed into law and become effective this summer. California, North Dakota, Oklahoma, and the District of Columbia (effective October 1, 2022) ban most or all noncompetes, and many other jurisdictions have slowly chipped away at the use and coverage of noncompetes. 

Outlook: The Senate HELP Committee is likely to hold a hearing on the use of noncompete agreements, including the Workforce Mobility Act, before this fall. In addition, with a newly established Democratic majority, the FTC may issue a proposed rule as soon as this fall. HR Policy Association and our Center On Executive Compensation will continue to inform policymakers on the legitimate business use of noncompete agreements and will advocate against proposals to limit and or ban such agreements. 

Published on: May 27, 2022

Authors: Chatrane Birbal

Topics: Employment Law