Reps. Peters, Gallagher, Eshoo, Meijer Re-Introduce Bill to Protect American Workers, Limit Non-Compete Agreements
February 25, 2021
WASHINGTON – Yesterday, Rep. Scott Peters (CA-52), Rep. Mike Gallagher (WI-08), Rep. Anna G. Eshoo (CA-18), and Rep. Peter Meijer (MI-03) re-introduced the bipartisan, bicameral Workforce Mobility Act to help American workers by limiting employers’ ability to force employees to sign non-compete agreements.
While California has long prohibited the use of non-competes, one in every five workers nationwide is covered by a non-compete agreement, with 40 percent of all American employees having been constrained by a non-compete agreement at some point during their career. The Workforce Mobility Act would narrow the allowable use of non-compete agreements to only include extraordinary cases like the sale of a business or the hiring of senior executives. It would also require employers to explicitly inform their employees of the limitations non-compete agreements impose.
Research has shown that the inclusion of non-compete clauses hamper real market competition, as workers with specifically honed skills get trapped in low-paying jobs with restrained ability to transition jobs. Non-compete agreements restrict worker mobility, reduce wages, and impinge on worker freedoms.
“Non-compete agreements slow the pace of economic innovation and productivity,” said Rep. Peters. “These agreements restrict workers, disrupt labor markets, and hinder economic prosperity for workers across the country. Our bill aims to give power back to the American worker so they can achieve their full potential and enhance our economy’s competitiveness.”
“Non-compete agreements restrict mobility in the workforce and hinder economic growth,” said Rep. Gallagher. “As we continue to rebuild our economy, it’s critical we modify burdensome regulations like this that can prevent workers from switching jobs and advancing in their careers. The Workforce Mobility Act is a bipartisan, common-sense way to reform non-compete agreements and empower American workers, and I’m proud to join Reps. Peters, Eshoo, and Meijer in introducing this bill.”
“For over a century, Californians have been able to move freely in the job market without restrictive non-compete agreements standing in the way of entrepreneurship and market competition. Because of that, Silicon Valley has become a global powerhouse for innovation,” said Rep. Eshoo. “Unfortunately, nationwide, one in five Americans are constrained by non-compete agreements that trap them in low-paying positions and keep them from transitioning jobs. As we work to restore our economy, it’s important that we empower American workers to freely pursue their careers. I’m proud to introduce the Workforce Mobility Act with Reps. Peters, Gallagher, and Meijer to prohibit non-compete agreements across our country, ensuring Americans have the freedom to innovate.”
“The expansion of non-compete agreements into labor markets has led to negative impacts on wage growth and hobbled broader economic gains,” said Rep. Meijer. “As the country seeks to recover from the effects of the COVID pandemic, it is critical we enact policies that support flexibility and opportunity for workers both in West Michigan and across the nation. I’m proud to support this common-sense legislation which will protect businesses with bona fide intellectual property concerns while also liberating workers and enabling them to seek greater prosperity.”
Senators Chris Murphy (D-Conn.) and Todd Young (R-Ind.) introduced the legislation in the U.S. Senate, joined by Senator Kevin Cramer (R-N.D.) and Senator Tim Kaine (D-Va.) as an original co-sponsors.
“Non-compete agreements impact all Americans regardless of their industry or income bracket, and I’m tired of seeing companies hide behind these agreements as a way to depress wages and prevent competition. People want to be able to change jobs and earn more money. The Workforce Mobility Act provides that freedom while also supporting new business opportunities and overall economic growth,” said Sen. Murphy.
“Non-compete agreements stifle wage growth, career advancement, innovation, and business creation. Our bill aims to remove these barriers, and create opportunities that help, not hinder, Hoosier workers,” said Sen. Young. “During this global pandemic, Americans need utmost flexibility to find and secure employment – this is clearly not the time for non-compete agreements that legally deny workers their ‘freedom to leave.’ The reforms in the Workforce Mobility Act will empower our workers and entrepreneurs so they can freely apply their talents where their skills are in greatest demand, especially given the dramatic shifts in the job market over the past year."
"Non-compete agreements hinder worker mobility, reduce wage growth, and stifle entrepreneurship and innovation,” said John Lettieri, President and CEO of the Economic Innovation Group. “At a time when millions of workers have been displaced by a pandemic and economic crisis, the bipartisan Workforce Mobility Act would be a major step in fostering a more open and dynamic economy in which all Americans can achieve their full potential. EIG applauds Senators Murphy, Young, Cramer, and Kaine and Representatives Peters, Gallagher, Eshoo, and Meijer for their leadership on this important legislation.”
“Non-compete clauses strengthen the power of employers at the expense of millions of workers across America,” said Sandeep Vaheesan, Legal Director at Open Markets Institute. “These unfair contracts reduce job market mobility and depress competition among employers for workers, lowering wages and wage growth and impeding new business creation. Banning non-competes across occupations and at all income levels, as this legislation proposes to do, would be a major step in advancing workers' freedom in the labor market.”
H.R. 1367, The Workforce Mobility Act would:
- 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; and
- Require the Federal Trade Commission and the Department of Labor to submit a report to Congress on any enforcement actions taken.