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Could We Ever See a Federal Ban on Non-Compete Agreements?

Congress has looked at introducing new regulations on non-compete agreements. As an issue that comes up on a national level every so often, Employers and Employees wonder whether non-compete agreements are valid and if they will be upheld by the courts. Congress has looked at non-compete agreements and courts closely scrutinize these agreements, but it is unlikely that there will be a total ban on non-competes in the near future.

The most recent effort to regulate these agreements occurred in the 116th congress. Senators Chris Murphy (D-Conn.) and Todd Young (R-Ind.) introduced a bipartisan bill to regulate these agreements in October 2019. That legislation, dubbed the Workforce Mobility Act of 2019, proposed what would have amounted to a near complete ban on a federal level of employee non-compete agreements, with exceptions in place for certain types of business transactions.

The legislation ultimately died in chamber, but the fact that it had some bipartisan appeal made it an eye opener for business owners, many of whom are waiting for the next instance of attempts at tighter regulations on these agreements.

Would such changes ever get enough approval?

It’s almost a certainty non-competes will be reviewed at the federal and state legislative level. The Workforce Mobility Act was not the first attempt at such legislation—other efforts recently failed in 2018 and earlier in 2019. In addition, some states already have enacted legislation to limit non-compete agreements.

The primary reason the issue keeps coming back up is that there are many who feel that non-compete agreements can significantly damage the future career prospects of a person leaving a company. While non-compete clauses are not inherently unfair, there are certainly companies that abuse these agreements and establish unreasonable expectations that employees must agree to as a condition of their employment.

Approximately 40 percent of American workers will be required to sign a non-compete clause at some point in their careers. The prevalence of these agreements is only increasing, even with employees in relatively low-paying jobs.

One of the impetuses for some legislation on non-competes is that they can be a barrier to employees finding work and feeling threatened by lawsuit. Enforcing a non-compete involves litigation and it can be expensive for both the employer and the employee. Avoiding a lawsuit is best for both parties and non-competes should be carefully drafted to protect a legitimate business interest, but not be so restrictive as to prevent the employee from working.

Holden Law Firm drafts, reviews and negotiates non-competes and can assist both employers and employees with non-compete issues. Please call us if you have questions regarding non-competes or other employment contracts.

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