This bill makes most noncompete agreements unenforceable for individuals who are employed by or perform work under contract with a person engaged in commerce, subject to specified exceptions tied to the sale of a business, partnership dissolutions, and brief senior‑executive restrictions tied to severance. It preserves the ability to protect trade secrets and disallow predispute arbitration or class‑waiver provisions that would block challenges to these prohibitions.
The measure matters because it replaces a patchwork of state rules with a uniform federal rule for post‑employment noncompetes entered into after enactment, reallocates enforcement authority between the Federal Trade Commission and the Department of Labor, creates a private right of action, and forces employers and dealmakers to redesign hiring, severance, and M&A arrangements to comply.
At a Glance
What It Does
The bill renders noncompete agreements entered after enactment void and unenforceable nationwide except for three narrow categories: agreements tied to the sale of a business (including specified geographic limits), partnership dissolution agreements, and time‑limited covenants with senior executives that are paired with one‑year severance. It expressly leaves trade‑secret nondisclosure protections intact.
Who It Affects
Employers across industries that use post‑employment restraints, HR and legal teams that draft employment contracts, M&A parties negotiating goodwill protections, senior executives involved in transactions, and individuals who are employees or contracted workers conducting commerce under the Fair Labor Standards Act definition.
Why It Matters
By eliminating the majority of noncompetes, the bill shifts how employers protect customer lists, proprietary know‑how, and human capital—moving disputes toward trade‑secret and nondisclosure law and into enforcement channels administered by the FTC, Department of Labor, state attorneys general, and private litigants.
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What This Bill Actually Does
The Workforce Mobility Act forbids new noncompete agreements between employers (or contracting parties) and individuals performing work in or affecting commerce. The statute applies only to agreements made after the law’s effective date and defines a noncompete broadly to include time, geographic, and functionally restrictive post‑employment covenants.
Once the rule applies, such covenants have no force or effect unless they fall into clearly enumerated exceptions.
There are three substantive exceptions. First, a buyer of a business may obtain a covenant from the seller that bars the seller from operating a competing business within a specified geographic area, provided the buyer actually conducts like business in that area.
Second, partners can agree upon restraints that take effect on dissolution or dissociation, again limited to specified geographic areas where the partnership transacted business. Third, a senior executive who is part of a sale may agree to a noncompete only if the restriction is time‑limited to one year and the severance terms ensure the executive receives at least the compensation they would reasonably expect over the next year.Trade secrets and nondisclosure obligations are explicitly preserved: employers may still contract to prevent disclosure of trade secrets even after employment ends.
The bill also requires employers to post notices about the law where employee notices are customarily placed and authorizes the Secretary of Labor to run public‑awareness efforts. Predispute arbitration agreements and predispute class‑ or joint‑action waivers cannot be enforced to block claims under this Act.Enforcement is multi‑layered.
The Federal Trade Commission treats violations as unfair or deceptive acts, and the FTC retains its full enforcement powers under the FTC Act. The Department of Labor is authorized to investigate, bring suits on behalf of aggrieved individuals (subject to an overall four‑year statute of limitations), and must issue implementing regulations within 18 months.
The FTC and DOL must develop shared standards for complementary enforcement within one year of enactment. The statute also creates a private right of action for individuals to recover actual damages plus costs and reasonable attorneys’ fees, and it grants state attorneys general parens patriae authority to sue on behalf of residents.
The Five Things You Need to Know
Ban scope: The prohibition applies only to noncompete agreements entered into after the date of enactment and treats such agreements as having no force or effect unless an exception applies.
Senior‑executive carveout: A sale‑related noncompete for a senior executive is limited to one year and requires a severance contract that guarantees at least the executive’s expected one‑year compensation.
Enforcement structure: The FTC enforces violations as unfair or deceptive acts under the FTC Act while the Department of Labor may investigate, sue on behalf of individuals (with a 4‑year statute of limitations), and promulgate regulations within 18 months.
Dispute‑resolution ban: Predispute arbitration agreements and predispute joint‑action waivers are invalid and unenforceable for alleged violations of the Act, enabling both individual and collective litigation.
Notice and reporting: Employers must post conspicuous notices of the law for employees and applicants, and the FTC and DOL must each create complaint intake systems with confidentiality protections for complainants.
Section-by-Section Breakdown
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Nationwide Prohibition on New Noncompetes
This provision makes it unlawful to enter into, enforce, or attempt to enforce a post‑employment noncompete with any person who is employed by or performs work under contract with an employer in or affecting commerce. Practically, that converts covered covenants signed after enactment into nullities and forces employers to abandon routine blanket noncompetes for new hires and contractors.
Carveouts for Business Sales, Partnership Dissolution, and Senior Executives
The statute preserves narrowly targeted restraints tied to the sale of a business (a buyer can obtain a geographic noncompete from a seller), allows partners to agree on post‑dissolution noncompetes, and permits a sale‑related covenant with a senior executive only when paired with severance guaranteeing roughly one year of compensation and limited to one year of restriction. These mechanics channel employer protection into transaction‑specific bargains rather than across‑the‑board employment controls.
Trade Secret Protections Left Intact
The Act explicitly states that it does not prevent employers from contracting to protect trade secrets, including post‑employment nondisclosure obligations. That means employers will rely more heavily on confidentiality clauses and theft‑of‑trade‑secret claims to protect customer lists, technical know‑how, and other proprietary assets.
Employer Notice Requirement and Public Outreach
Employers must post a conspicuous notice of the Act where employee notices are customarily displayed, either physically or electronically. The Secretary of Labor may also run a public awareness campaign—an administrative complement meant to reduce compliance gaps and educate workers about their rights under the new federal rule.
Enforcement: FTC, DOL, Private Suits, and State AGs
The Federal Trade Commission enforces the ban as an unfair or deceptive practice under the FTC Act, with full investigatory and remedial powers. The Department of Labor gains investigatory authority and may sue on behalf of aggrieved individuals subject to a four‑year limitations period; DOL must issue implementing regulations within 18 months. The law creates a private right of action for individuals to recover actual damages and costs, bars predispute arbitration and class‑waiver clauses for these claims, and allows state attorneys general to sue as parens patriae.
Definitions and Coverage Limits
Key terms—like 'noncompete agreement', 'business entity', 'commerce', and 'senior executive official'—are defined, and the Act ties 'employ', 'employee', and 'employer' to the Fair Labor Standards Act. That linkage affects which workers fall within the prohibition and leaves open interpretive questions about contractors and other nonstandard arrangements.
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Explore Employment in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Rank‑and‑file workers who switch jobs: Eliminating most post‑employment restraints increases bargaining power for employees—especially lower‑wage and mid‑skill workers who historically faced broad noncompetes—by removing barriers to accepting competing work.
- Startups and competing employers: Firms that rely on hiring experienced talent gain access to candidates previously locked into covenants, helping recruitment and fostering labor market competition.
- Entrepreneurs selling small businesses: The sale carveout preserves a mainstream mechanism (geographic goodwill covenants) that allows buyers to protect the value they paid for, making deals more feasible while restricting broad employee restraints.
- Consumers and innovators: Increased worker mobility can accelerate the diffusion of skills and ideas across firms, potentially speeding product development and reducing market concentration effects tied to labour immobility.
Who Bears the Cost
- Employers that currently use broad noncompetes: Companies that rely on sweeping post‑employment restraints to protect customer lists or limit competitive hires will need to redesign contracting and protective measures, shifting to NDAs or trade‑secret strategies.
- Dealmakers and sellers in M&A: Parties must structure sales carefully to meet the statute’s geographic and severance requirements; failure to meet those technical thresholds could strip away intended protections post‑closing.
- Human resources and in‑house counsel: HR teams must update offer letters, severance plans, and contractor agreements and manage increased litigation and compliance workflows as private suits and agency enforcement rise.
- Enforcement agencies and state governments: The FTC and DOL will face increased investigatory workloads and coordination demands, and states may see a rise in parens patriae litigation and attendant administrative burdens.
Key Issues
The Core Tension
The core dilemma is balancing two legitimate objectives: protecting workers’ ability to change jobs and preventing opportunistic transfer of a buyer’s or seller’s goodwill and employers’ truly confidential assets. The bill favors mobility by nullifying broad covenants but forces reliance on trade‑secret and transaction‑specific protections that may not map cleanly to every competitive concern—creating winners and losers depending on how courts and agencies draw those lines.
The Act centralizes a policy choice: it eliminates the routine use of noncompetes but leaves trade‑secret law and narrowly drawn transactional covenants as the primary tools for employers. That raises practical questions about whether trade‑secret and nondisclosure remedies will be sufficient to protect legitimate competitive interests—legal standards for trade‑secret misappropriation can be higher and outcome‑dependent, potentially increasing litigation over what constitutes protectable information versus routine client knowledge.
Operationally, the bill creates a complicated enforcement landscape. The FTC and DOL must coordinate standards and jurisdictional boundaries, yet the statute leaves many procedural questions to forthcoming regulation (due in 18 months) and to interagency standards (due in one year).
The private right of action plus invalidation of predispute arbitration and class waivers invite a wave of litigation that could test statutory definitions—particularly the use of the FLSA definitions for 'employee' and 'employer' and whether independent contractors or gig workers are fully covered. Finally, the carveouts (sales, partnerships, senior executives) are narrow and technically defined; parties will likely litigate whether a given transaction satisfies the 'qualified asset or interest' and severance thresholds, creating transaction‑specific uncertainty.
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