The Workforce Mobility Act of 2023

Introduction

The landscape of employment law is ever-evolving. Some legislative proposals threaten to erode workplace equity, but others reflect a broader societal recognition of workplace rights and fairness. A notable example of the latter: the recently reintroduced Workforce Mobility Act of 2023 (the “Act”). The Act is a bipartisan legislative endeavor aimed at reducing the use of employer non-compete agreements across the United States. Backed by lawmakers from both sides of the aisle, the Act will foster a more competitive and mobile labor market. Particularly for equity-forward employers, exploring the implications of this Act and related developments is imperative.

Unpacking Non-Compete Agreements

Non-compete agreements, once a staple in contracts for high-level executives, have trickled down the occupational ladder. Presently, employees can expect these to appear in employment terms across various sectors and job levels. These agreements often restrict employees from working for competitors or starting similar businesses. Existing laws in most states require reasonable limitations for enforcement, like a specified geographic area and timeframe post-employment. Employers have touted these as necessary for protecting business interests. But non-compete agreements can stymie workforce mobility, wage growth, and professional development. This is particularly so for lower-wage workers and those in vulnerable employment situations. Widespread use of noncompetes can contribute to systemic inequities within the workplace, making the case for legislative intervention.

In recent years, restrictive covenants have come under scrutiny as extreme and even unconscionable. As one well-known illustration, the sandwich chain Jimmy John’s found itself facing a series of legal challenges starting around 2015. Employees in Illinois challenged its two-year noncompetition clause that was a standard condition of employment for all positions. This meant that hourly sandwich makers were prohibited from working at Subway, within two years of working at Jimmy John’s. Jimmy John’s underwent investigation by the New York attorney general, after which it backtracked publicly off of the universal noncompetes.

The Workforce Mobility Act of 2023

The Workforce Mobility Act of 2023 seeks to address the overuse and enforcement of post-employment noncompetition agreements. It aims to promote stronger wage growth and enhance job mobility for workers across the board. The bipartisan support underscores a shared understanding of the need for a more level playing field in the employment sector.

While the Act is still in the early stages of the legislative process, it is already noteworthy. The bipartisan backing of the Workforce Mobility Act of 2023 is a hopeful indication of a shifting paradigm. Lawmakers’ collective acknowledgment of non-compete agreements’ detriments and the need for reform is a step in the right direction. It also illuminates the path for further legislative and administrative efforts aimed at fostering a fair and competitive labor market.

Proposed FTC Ban and Enforcement Actions

The Workforce Mobility Act is part of a broader collective focus on practices harmful to competition and workers’ rights. Federal Trade Commission proposed a rule to ban post-termination non-competes in 2023. It received nearly 10,000 comments during the relevant period. If enacted, the FTC’s non-competition ban would require employers to rescind existing noncompetes and refrain from entering them. In the meantime, the FTC has been active in prosecuting employers engaging in “unfair methods of competition,” including employee noncompetes.

Conclusion

The Workforce Mobility Act of 2023 is a testament to the growing recognition of the need for equitable workplace practices. By addressing the restrictive nature of non-compete agreements, this legislation paves the way for enhanced worker mobility and wage growth. The bipartisan support it garners is a hopeful sign for future legislative endeavors aimed at an equitable employment landscape. It’s uncertain when it will be enacted or come into force. Employers can anticipate a period of legislative deliberation, and should it pass, a subsequent period before regulations are formulated. It’s advisable for employers to closely monitor the progress of this legislation and consider review of their practices accordingly. For employers looking to adopt equitable practices, it is never too soon to pivot. These developments suggest it may be time to revisit whether existing noncompetition agreements accord with organizational values.