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[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 731 Introduced in House (IH)]

<DOC>

118th CONGRESS
  1st Session
                                H. R. 731

   To prohibit certain noncompete agreements, and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            February 1, 2023

 Mr. Peters (for himself, Mr. Gallagher, and Ms. Eshoo) introduced the 
   following bill; which was referred to the Committee on Energy and 
    Commerce, and in addition to the Committee on Education and the 
 Workforce, for a period to be subsequently determined by the Speaker, 
 in each case for consideration of such provisions as fall within the 
                jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL

 
   To prohibit certain noncompete agreements, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Workforce Mobility Act of 2023''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) The proliferation of noncompete agreements throughout 
        sectors, occupational categories, and income brackets is 
        contrary to the commitment of Congress to foster stronger wage 
        growth for workers in the United States. Economists now 
        estimate that 1 in 5 workers is covered by a noncompete 
        agreement.
            (2) Noncompete agreements are blunt instruments that 
        crudely protect employer interests and place a drag on national 
        productivity by forcing covered workers to either idle for long 
        periods of time or leave the industries in which the workers 
        have honed their skills altogether.
            (3) Enforceable noncompete agreements also reduce wages, 
        restrict worker mobility, impinge on the freedom of a worker to 
        maximize labor market potential, and slow the pace of 
        innovation in the United States.
            (4) Employers have access to legal recourses to protect 
        their legitimate interests and property, including trade secret 
        protections, intellectual property protections, and 
        nondisclosure agreements that do not inflict broad collateral 
        harm on the labor market prospects for workers.
            (5) Employers that rely on a list or lists of vendors, 
        customers, or clients that are not easily obtained by an 
        individual through means other than the work relationship have 
        adequate legal protection through the use of trade secret 
        protections and nondisclosure agreements.
            (6) Noncompete agreements broadly restrict employment 
        options for workers in the United States when more narrowly 
        targeted remedies are readily available to employers.
            (7) Fostering an environment where employers can flourish 
        is necessary to promote vitality and prosperity in the economy.
            (8) Employers may retain critical skilled employees while 
        ensuring that disincentives affecting mobility, including 
        noncompete agreements, do not negatively impact the workforce 
        in the United States.

SEC. 3. PROHIBITING NONCOMPETE AGREEMENTS.

    (a) Prohibition.--
            (1) In general.--Except as provided in subsection (b), no 
        person shall enter into, enforce, or attempt to enforce a 
        noncompete agreement with any individual who is employed by, or 
        performs work under contract with, such person with respect to 
        the activities of such person in or affecting commerce.
            (2) Effect of agreements.--Except as provided in subsection 
        (b), a noncompete agreement described in paragraph (1) shall 
        have no force or effect.
    (b) Exceptions.--
            (1) Sale of goodwill or ownership interest.--
                    (A) In general.--A seller of a business entity may 
                enter into an agreement with the buyer to refrain from 
                carrying on a like business within a specified 
                geographic area described in subparagraph (C), if the 
                buyer, or any person deriving title to the goodwill of 
                the business entity or an ownership interest in the 
                business entity from the buyer, carries on a like 
                business in such specified geographic area.
                    (B) Senior executive officials with severance 
                agreements.--
                            (i) In general.--Subject to clause (ii), a 
                        buyer or seller of a business entity may enter 
                        into a noncompete agreement with a senior 
                        executive official who has a severance 
                        agreement described in clause (iii) that 
                        restricts the senior executive official from 
                        performing, within a specified geographic area 
                        described in subparagraph (C), any work that is 
                        similar to the work that the senior executive 
                        official performed for the buyer or seller, if 
                        the buyer, or any person deriving title to the 
                        goodwill of the business entity or an ownership 
                        interest in the business entity from the buyer, 
                        carries on a like business in such specified 
                        geographic area.
                            (ii) Time-limited agreement.--A noncompete 
                        agreement described in clause (i) may not 
                        restrict the senior executive official as 
                        described in such clause for a period that is 
                        more than one year.
                            (iii) Severance agreement.--A severance 
                        agreement described in this clause is an 
                        agreement between the buyer or seller of a 
                        business entity and a senior executive official 
                        that--
                                    (I) is part of the terms and 
                                conditions of the sale; and
                                    (II) requires monetary compensation 
                                for the senior executive official in 
                                the event of termination of the 
                                employment of the senior executive 
                                official at an amount that is not less 
                                than the compensation that the senior 
                                executive official is or would be 
                                reasonably expected to receive from the 
                                buyer during the 1-year period 
                                following the sale.
                    (C) Specified geographic area.--A specified 
                geographic area described in this subparagraph is a 
                geographic area--
                            (i) that is specified in an agreement 
                        described in subparagraph (A), or a noncompete 
                        agreement described in subparagraph (B), 
                        regarding a business entity; and
                            (ii) in which such business entity, 
                        including any division or subsidiary of such 
                        business entity, conducted business prior to 
                        the agreement or noncompete agreement.
            (2) Partnership dissolution or disassociation.--
                    (A) In general.--Any partner of a partnership may 
                enter into an agreement with any other member of the 
                partnership that, upon the dissolution of the 
                partnership or dissociation of the partner from such 
                partnership, the partner will refrain from carrying on 
                a like business within a specified geographic area 
                described in subparagraph (B), if any other member of 
                the partnership, or any person deriving title to the 
                partnership or the goodwill of the partnership from any 
                other member of the partnership, carries on a like 
                business in such specified geographic area.
                    (B) Specified geographic area.--A specified 
                geographic area described in this subparagraph is a 
                geographic area--
                            (i) that is specified in an agreement 
                        described in subparagraph (A); and
                            (ii) in which any business of the 
                        partnership has been transacted prior to the 
                        agreement.

SEC. 4. TRADE SECRETS.

    Nothing in this Act shall preclude a person from entering into an 
agreement with an individual who is employed by, or performs work under 
contract with, such person with respect to the activities of such 
person in or affecting commerce to not disclose any information 
(including after the individual is no longer employed or performing 
work for the person) regarding the person, or the work performed by the 
individual for the person, that is a trade secret.

SEC. 5. NOTICE; PUBLIC AWARENESS CAMPAIGN.

    (a) Notice.--Any person who engages an individual who is employed 
by, or performs work under contract with, such person with respect to 
the activities of such person in or affecting commerce shall post and 
maintain notice of the provisions of this Act--
            (1) in a conspicuous place on the premises of such person; 
        or
            (2) in a conspicuous place where notices to employees and 
        applicants for employment are customarily posted physically or 
        electronically by such person.
    (b) Public Awareness Campaign.--The Secretary of Labor may carry 
out activities to make the public aware of the provisions of this Act.

SEC. 6. ENFORCEMENT.

    (a) Federal Trade Commission.--
            (1) Unfair or deceptive acts or practices.--A violation of 
        section 3 or 5(a) shall be treated as a violation of a rule 
        defining an unfair or deceptive act or practice prescribed 
        under section 18(a)(1)(B) of the Federal Trade Commission Act 
        (15 U.S.C. 57a(a)(1)(B)).
            (2) Powers of commission.--
                    (A) In general.--The Federal Trade Commission shall 
                enforce sections 3 and 5(a) in the same manner, by the 
                same means, and with the same jurisdiction, powers, and 
                duties as though all applicable terms and provisions of 
                the Federal Trade Commission Act (15 U.S.C. 41 et seq.) 
                were incorporated into and made a part of this Act.
                    (B) Privileges and immunities.--Any person who 
                violates section 3 or 5(a) shall be subject to the 
                penalties and entitled to the privileges and immunities 
                provided in the Federal Trade Commission Act (15 U.S.C. 
                41 et seq.).
                    (C) Authority preserved.--Nothing in this Act shall 
                be construed to limit the authority of the Federal 
                Trade Commission under any other provision of law.
    (b) Department of Labor.--
            (1) In general.--The Secretary of Labor--
                    (A) shall investigate as the Secretary determines 
                necessary to determine violations of section 3 or 5(a) 
                by an employer; and
                    (B) may, subject to paragraph (2), bring an action 
                in any court of competent jurisdiction to obtain the 
                legal or equitable relief against an employer on behalf 
                of an individual aggrieved by the violation as may be 
                appropriate to effectuate the purposes of such 
                sections.
            (2) Statute of limitations.--An action described in 
        paragraph (1)(B) may not be commenced later than 4 years after 
        the date on which the violation occurred.
            (3) Regulations.--Not later than 18 months after the date 
        of enactment of this Act, the Secretary of Labor, in 
        consultation with the Chair of the Federal Trade Commission, 
        shall issue regulations as necessary to carry out this Act, 
        including with respect to the authority of the Secretary of 
        Labor to enforce violations of section 3 or 5(a) in accordance 
        with paragraph (1).
    (c) Standards for Dual Enforcement.--Not later than 1 year after 
the date of enactment of this Act, the Federal Trade Commission and the 
Secretary of Labor shall, for the purposes of enforcing this Act--
            (1) develop shared standards for consistent enforcement; 
        and
            (2) identify the scope of responsibility of the Federal 
        Trade Commission and such scope of the Secretary of Labor to 
        ensure complementary enforcement of this Act.
    (d) Reporting Violations.--
            (1) In general.--The Federal Trade Commission and the 
        Secretary of Labor shall each establish a system to receive 
        complaints by individuals regarding alleged violations of 
        section 3.
            (2) Confidentiality.--Except as otherwise required by law, 
        the Federal Trade Commission and the Secretary of Labor may not 
        disclose the identity or identifying information of any 
        individual providing a complaint under paragraph (1), without 
        explicit consent from the individual.
    (e) Private Right of Action.--
            (1) In general.--An individual who is aggrieved by a 
        violation of this Act may bring a civil action in any 
        appropriate district court of the United States.
            (2) Relief.--In a civil action under paragraph (1), a court 
        may award--
                    (A) any actual damages sustained by the individual 
                as a result of the violation; and
                    (B) in the case of any successful action, the costs 
                of the action and reasonable attorney's fees, as 
                determined by the court.
    (f) Enforcement by States.--
            (1) In general.--In any case in which the attorney general 
        of a State has reason to believe that an interest of the 
        residents of the State has been or is threatened or adversely 
        affected by any person who violates any provision of section 3 
        or 5(a) or any rule promulgated under this Act to carry out 
        such section, the attorney general of the State, as parens 
        patriae, may bring a civil action on behalf of the residents of 
        the State in an appropriate State court or an appropriate 
        district court of the United States to--
                    (A) enjoin any further such violation by the 
                person;
                    (B) compel compliance with section 3 or 5(a) or any 
                such rule;
                    (C) obtain a permanent, temporary, or preliminary 
                injunction;
                    (D) obtain damages, restitution, or other 
                compensation on behalf of the residents of the State; 
                or
                    (E) obtain any other appropriate equitable relief.
            (2) Preservation of state powers.--Nothing in this 
        subsection shall be construed as altering, limiting, or 
        affecting the authority of the attorney general of a State to--
                    (A) bring an action or other regulatory proceeding 
                arising solely under the laws in effect in that State; 
                or
                    (B) exercise the powers conferred on the attorney 
                general by the laws of the State, including the ability 
                to conduct investigations, administer oaths or 
                affirmations, or compel the attendance of witnesses or 
                the production of documentary or other evidence.
    (g) Arbitration and Class Action.--Notwithstanding any other 
provision of law, no predispute arbitration agreement or predispute 
joint-action waiver shall be valid or enforceable with respect to any 
alleged violation of section 3 or 5(a).

SEC. 7. REPORTS.

    Not later than 1 year after the date on which the Secretary of 
Labor issues any regulations under section 6(b)(3), the Federal Trade 
Commission and the Secretary of Labor shall each submit to Congress a 
report on any actions taken by the Federal Trade Commission or 
Secretary, respectively, to enforce the provisions of this Act.

SEC. 8. DEFINITIONS.

    For purposes of this Act:
            (1) Business entity.--The term ``business entity'' means 
        any partnership (including a limited partnership or a limited 
        liability partnership), limited liability company (including a 
        series of a limited liability company formed under the laws of 
        a jurisdiction that recognizes such a series), or corporation.
            (2) Buyer.--The term ``buyer'', with respect to a business 
        entity, means any person who buys the goodwill of the business 
        entity, buys or otherwise acquires ownership interest in the 
        business entity, or buys a qualified asset or interest with 
        regard to the business entity.
            (3) Class action.--The term ``class action'' means a 
        lawsuit in which 1 or more parties seek or obtain class 
        treatment pursuant to rule 23 of the Federal Rules of Civil 
        Procedure or a comparable rule or provision of State law.
            (4) Commerce.--The term ``commerce'' has the meaning given 
        the term in section 3 of the Fair Labor Standards Act of 1938 
        (29 U.S.C. 203).
            (5) Employ; employee; employer.--The terms ``employ'', 
        ``employee'', and ``employer'' have the meanings given such 
        terms in section 3 of such Act (29 U.S.C. 203).
            (6) Noncompete agreement.--The term ``noncompete 
        agreement'' means an agreement, entered into after the date of 
        enactment of this Act between a person and an individual 
        performing work for the person, that restricts such individual, 
        after the working relationship between the person and 
        individual terminates, from performing--
                    (A) any work for another person for a specified 
                period of time;
                    (B) any work in a specified geographical area; or
                    (C) any work for another person that is similar to 
                such individual's work for the person that is a party 
                to such agreement.
            (7) Owner of a business entity.--The term ``owner of a 
        business entity'' means--
                    (A) in the case of a business entity that is a 
                partnership (including a limited partnership or a 
                limited liability partnership), any partner;
                    (B) in the case of a business entity that is a 
                limited liability company (including a series of a 
                limited liability company formed under the laws of a 
                jurisdiction that recognizes such a series), any member 
                of such company; or
                    (C) in the case of a business entity that is a 
                corporation, a capital stockholder of the business 
                entity who owns not less than 5 percent of the capital 
                stock.
            (8) Ownership interest.--The term ``ownership interest'' 
        means--
                    (A) in the case of a business entity that is a 
                partnership (including a limited partnership or a 
                limited liability partnership), a partnership interest;
                    (B) in the case of a business entity that is a 
                limited liability company (including a series of a 
                limited liability company formed under the laws of a 
                jurisdiction that recognizes such a series), a 
                membership interest; or
                    (C) in the case of a business entity that is a 
                corporation, not less than 5 percent of the capital 
                stock of the business entity or, as applicable, a 
                subsidiary of the business entity.
            (9) Person.--The term ``person'' has the meaning given the 
        term in section 3 of the Fair Labor Standards Act of 1938 (29 
        U.S.C. 203).
            (10) Predispute arbitration agreement.--The term 
        ``predispute arbitration agreement'' means an agreement to 
        arbitrate a dispute that has not yet arisen at the time of the 
        making of the agreement.
            (11) Predispute joint-action waiver.--The term ``predispute 
        joint-action waiver'' means an agreement, whether or not part 
        of a predispute arbitration agreement, that would prohibit, or 
        waive the right of, one of the parties to the agreement to 
        participate in a joint, class, or collective action in a 
        judicial, arbitral, administrative, or other forum, concerning 
        a dispute that has not yet arisen at the time of the making of 
        the agreement.
            (12) Qualified asset or interest.--The term ``qualified 
        asset or interest'', with respect to a business entity, means 
        an asset or interest that is--
                    (A) all or substantially all of the operating 
                assets and the goodwill of the business entity;
                    (B) all or substantially all of the operating 
                assets of a division, or a subsidiary, of the business 
                entity and the goodwill of that division or subsidiary; 
                or
                    (C) all of the ownership interest of any subsidiary 
                of the business entity.
            (13) Sale.--The term ``sale'', with respect to a business 
        entity, means the sale of the goodwill of the business entity, 
        the sale or other disposal of all of the ownership interest of 
        a seller in the business entity, or the sale of a qualified 
        asset or interest with regard to the business entity.
            (14) Seller.--The term ``seller'', with respect to a 
        business entity, means any person who sells the goodwill of the 
        business entity, any owner of the business entity selling or 
        otherwise disposing of all of his or her ownership interest in 
        the business entity, or any owner of the business entity that 
        sells a qualified asset or interest with regard to the business 
        entity.
            (15) Senior executive official.--The term ``senior 
        executive official'', with respect to a sale, means an official 
        who was acquired as an employee of the buyer in such sale 
        through the terms and conditions of the sale, and, on the day 
        before the date of such sale--
                    (A) who was employed by the seller in such sale;
                    (B) who was responsible for making or directing 
                major decisions of the seller; and
                    (C) whose rate of compensation was in the highest 
                10 percent of the compensation rates for all employees 
                of the seller.
            (16) Trade secret.--The term ``trade secret'' has the 
        meaning given the term in section 1839 of title 18, United 
        States Code.
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