Workforce Mobility Act of 2021
Bill: H.R.1367 | Sponsor: Rep. Peters, Scott H. (D-CA)
Policy area: Labor and Employment

Summary:
Workforce Mobility Act of 2021
This bill prohibits the use of noncompete agreements in the context of commercial enterprises except under certain circumstances.
The first exception is that the seller of the entirety of a business interest may enter an agreement to refrain from engaging in a similar business in the geographic areas where the business being sold has conducted business prior to the agreement. This exception extends to agreements by senior executive officials who have a severance agreement as part of the conditions of sale (i.e., a buyout provision). Second, a partner of an enterprise, in anticipation of the dissolution of the partnership or disassociation of a partner, may enter an agreement to refrain from engaging in a similar business in the geographic areas where the partnership has conducted business prior to the agreement.
Commercial enterprises must post notice of this prohibition in the workplace.
The Federal Trade Commission or the Department of Labor shall investigate or enforce the provisions of this 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 2021''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) The proliferation of noncompete agreements throughout 
        sectors, occupational categories, and income brackets is 
        contrary to Congress's commitment to fostering 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 where they have honed 
        their skills altogether.
            (3) Enforceable noncompete agreements also reduce wages, 
        restrict worker mobility, impinge on worker freedoms to 
        maximize their labor market potential, and slow the pace of 
        American innovation.
            (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 workers' labor market prospects.
            (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 secrets 
        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 threaten to enforce a 
        noncompete agreement with any individual who performs work for 
        the person and who in any workweek is engaged in commerce or in 
        the production of goods for commerce (or is employed in an 
        enterprise engaged in commerce or in the production of goods 
        for 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.--Any person who sells the goodwill 
                of a business, any owner of a business entity selling 
                or otherwise disposing of all of his or her ownership 
                interest in the business entity, or any owner of a 
                business entity that sells an asset or interest as 
                described in subparagraph (B), 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 or ownership 
                interest from the buyer, carries on a like business in 
                such specified geographic area.
                    (B) Asset or interest.--An asset or interest 
                described in this subparagraph is--
                            (i) all or substantially all of the 
                        operating assets and the goodwill of the 
                        business entity;
                            (ii) 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
                            (iii) all of the ownership interest of any 
                        subsidiary of the business entity.
                    (C) Specified geographic area.--A specified 
                geographic area described in this subparagraph is a 
                geographic area specified in the agreement described in 
                subparagraph (A), or (D) as applicable, where the 
                business, business entity, division, or subsidiary sold 
                as the subject of such agreement, has conducted 
                business prior to the agreement.
                    (D) Senior executive officials with severance 
                agreements.--
                            (i) In general.--Any buyer or seller 
                        described in subparagraph (A) may enter into an 
                        agreement with a senior executive official who 
                        has a severance agreement described in clause 
                        (iii) for the senior executive official 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 or ownership 
                        interest from the buyer, carries on a like 
                        business in such specified geographic area.
                            (ii) Time-limited agreement.--An agreement 
                        described in clause (i) may not require the 
                        senior executive official to refrain from 
                        carrying on a like business as described in 
                        such clause for a period that is greater than 
                        one year.
                            (iii) Severance agreement.--A severance 
                        agreement described in this clause is an 
                        agreement between the buyer and the senior 
                        executive official, or an agreement between the 
                        seller and the senior executive official, 
                        described in clause (i) 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 greater 
                                than or equal to the compensation the 
                                official is reasonably expected to 
                                receive from the buyer during the 1-
                                year period following the sale.
                    (E) Definitions.--
                            (i) Buyer, sale, seller.--For purposes of 
                        this paragraph--
                                    (I) the term ``buyer'' means, as 
                                described in subparagraph (A), any 
                                person who buys the goodwill of a 
                                business, buys or otherwise acquires 
                                ownership interest in a business 
                                entity, or buys an asset or interest as 
                                described in subparagraph (B);
                                    (II) the term ``sale'' means, as 
                                described in subparagraph (A), the sale 
                                of the goodwill of a business, the sale 
                                or other disposal of all of the 
                                ownership interest of the seller in a 
                                business entity, or the sale of an 
                                asset or interest as described in 
                                subparagraph (B); and
                                    (III) the term ``seller'' means, as 
                                described in subparagraph (A), any 
                                person who sells the goodwill of a 
                                business, any owner of a business 
                                entity selling or otherwise disposing 
                                of all of his or her ownership interest 
                                in the business entity, or any owner of 
                                a business entity that sells an asset 
                                or interest as described in 
                                subparagraph (B).
                            (ii) Senior executive official.--For 
                        purposes of subparagraph (D), the term ``senior 
                        executive official'' means an official who was 
                        acquired as an employee of the buyer through 
                        the terms and conditions of the sale, and, on 
                        the day before the date of such sale--
                                    (I) who was employed by the seller;
                                    (II) who had an integral role in 
                                the senior executive management team of 
                                the seller;
                                    (III) who was responsible for 
                                making or directing major decisions of 
                                the seller; and
                                    (IV) whose rate of compensation was 
                                in the highest 10 percent of the 
                                compensation rates for all employees of 
                                the seller.
            (2) Partnership dissolution or disassociation.--
                    (A) In general.--Any partner may, upon or in 
                anticipation of any circumstance described in 
                subparagraph (B), enter into an agreement with any 
                other member of the partnership that the partner will 
                not carry on a like business within a specified 
                geographic area described in subparagraph (C), if any 
                other member of the partnership, or any person deriving 
                title to the business or the goodwill of the business 
                from any other member of the partnership, carries on a 
                like business in such specified geographic area.
                    (B) Circumstances.--A circumstance described in 
                this subparagraph is either of the following:
                            (i) A dissolution of the partnership.
                            (ii) Dissociation of the partner from the 
                        partnership.
                    (C) Specified geographic area.--A specified 
                geographic area described in this subparagraph is a 
                geographic area specified in the agreement described in 
                subparagraph (A) where 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 working for the person to not share any 
information (including after the individual is no longer working 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 performs work 
for the person in commerce or in the production of goods for commerce 
(or employs an individual in an enterprise engaged in commerce or in 
the production of goods for commerce) shall post notice of the 
provisions of this Act in a conspicuous place on the premises of 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.).
    (b) Department of Labor.--
            (1) In general.--The Secretary of Labor--
                    (A) shall receive and investigate a complaint of a 
                violation of section 3 or 5(a), if the person in 
                violation of such section is an employer of one or more 
                employees; and
                    (B) may bring an action in any court of competent 
                jurisdiction to obtain the legal or equitable relief 
                against the person described in subparagraph (A) on 
                behalf of an individual aggrieved by the violation as 
                may be appropriate to effectuate the purposes of such 
                sections, subject to paragraph (2).
            (2) Civil fines.--In an action described in paragraph 
        (1)(B), the court of competent jurisdiction described in such 
        paragraph shall impose a civil fine on any person described in 
        paragraph (1)(A) who violates section 3 or 5(a), in an amount 
        not to exceed $5,000 for each week the person is in such 
        violation. Such fine shall be paid to the individual aggrieved 
        by such violation.
            (3) Regulations.--Not later than 180 days after the date of 
        enactment of this Act, the Secretary of Labor shall issue 
        regulations with respect to the authority of the Secretary in 
        enforcing violations of section 3 or 5(a) in accordance with 
        this subsection.
    (c) Standards for Dual Enforcement.--Not later than 90 days 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) 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 to enforce 
                any liability under this subsection, the costs of the 
                action and reasonable attorney's fees, as determined by 
                the court.

SEC. 7. REPORTS.

    Not later than 1 year after the date on which the Secretary of 
Labor issues the 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 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) Commerce; enterprise engaged in commerce or in the 
        production of goods for commerce; person; state.--The terms 
        ``commerce'', ``enterprise engaged in commerce or in the 
        production of goods for commerce'', ``person'', and ``State'' 
        have the meanings given the terms in section 3 of the Fair 
        Labor Standards Act of 1938 (29 U.S.C. 203).
            (3) Employee; employer.--The terms ``employee'' and 
        ``employer'' have the meanings given such terms in section 3 of 
        the Fair Labor Standards Act of 1938 (29 U.S.C. 203).
            (4) 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 
        from performing, after the working relationship between the 
        person and individual terminates, any of the following:
                    (A) Any work for another person for a specified 
                period of time.
                    (B) Any work in a specified geographical area.
                    (C) Any work for another person that is similar to 
                such individual's work for the person that is a party 
                to such agreement.
            (5) 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, any owner of capital stock.
            (6) 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, a capital stockholder who owns not less 
                than 5 percent of the capital stock.
            (7) 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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