[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5710 Introduced in House (IH)]
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116th CONGRESS
2d Session
H. R. 5710
To prohibit certain noncompete agreements, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
January 29, 2020
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 Labor, 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 2020''.
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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