By Wayne D. Garris Jr., J.D.
The bipartisan bill would limit the use of non-compete agreements to the dissolution of partnerships or the sale of a business.
On October 16, Senators Todd Young (R-Ind.) and Chris Murphy (D-Conn.) 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.”
- 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 percent 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 praise from observers across the political spectrum. John Lettieri, President and CEO of the Economic Innovation Group, described the bill as a “major step in promoting a more open, competitive, and dynamic economy for all Americans.”
According to Eli Lehrer, President of the R Street Institute, “[a]nybody who cares about maintaining a functioning free market for workers and employers alike should oppose non-compete agreements.”
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