Senators Introduce Bipartisan Bill to Curb Noncompete Agreements

Senators Introduce Bipartisan Bill to Curb Noncompete Agreements

Employers would be banned from requiring most workers to sign noncompete agreements as a condition of employment under a Senate bill with bipartisan support.

These agreements generally prohibit employees from starting a competing business or working for a competitor in a certain geographic region and for a specified time after the employment relationship ends.

"Noncompete agreements stifle wage growth, career advancement, innovation and business creation," said Sen. Todd Young, R-Ind., a sponsor of the bill. "Our bill aims to remove these barriers and create opportunities that help [workers]."

Young, along with Sen. Chris Murphy, D-Conn, introduced the bill Oct. 17. "Too many employers hide these agreements in low-wage workers' contracts, trapping them in low-paying jobs and preventing real competition," Murphy said.

We've rounded up articles and resources from SHRM Online and other trusted media outlets on noncompete agreements.

Broad Reach

About 40 percent of U.S. workers have been required to sign a noncompete agreement at some point in their careers, according to the Treasury Department. If passed, the proposed law would ban noncompete agreements in most situations and allow their use only in "necessary instances of a dissolution of a partnership or the sale of a business," the senators said in a statement. Employers can use other means to protect their legitimate interests, the lawmakers said, such as nondisclosure agreements that prohibit workers from discussing trade secrets and other confidential business information. The bill would allow workers to sue their employers, and businesses would face a penalty of $5,000 "for each week a worker is forced to work under an outlawed agreement," according to the statement.


Overreaching Noncompetes Scrutinized

In 2016, Jimmy John's restaurants settled lawsuits filed by New York and Illinois officials and agreed to stop requiring sandwich makers and delivery drivers to sign restrictive contracts. In Illinois, the company also agreed to pay the state $100,000 to create programs that promote best practices regarding the arrangements. New York also settled a suit in 2016 against Law360, a legal news site that required most of its employees to sign noncompete agreements. Eric Schneiderman, the state's former attorney general, was particularly incensed that the mandate applied to entry-level news assistants working their first jobs out of college.

(SHRM Online)

Check State Law

Over the last few years, several states have strengthened their noncompete laws or introduced legislation to limit the use of noncompete agreements. With the introduction and passage of more employee-friendly legislation at the state level, it is important that employers understand the noncompete laws that apply to their locations.

(SHRM Online)

[SHRM members-only HR Q&A: Can an employer make noncompete and confidentiality agreements a condition of employment for current employees?]

Employers Should Carefully Craft Agreements

Businesses should figure out what they are really looking to protect, and they should draft covenants accordingly, said Laurent Drogin, an attorney with Tarter Krinsky & Drogin in New York City. "The narrower the covenant, the greater likelihood it will be enforced." The key is to use the right tools to protect relevant business interests—but employers should also consider other ways to retain valuable employees. "Fear of losing talent to a competitor is a great motivator to reward good employees with promotions and raises and induces businesses to establish and maintain a positive culture where the competitor's grass never looks greener," Drogin noted. 

(SHRM Online)

When Should Employers Use Nondisclosure Agreements?

Many employers opt to use nondisclosure agreements instead of noncompetes to protect their sensitive business information. But when should such agreements be used, and what types of information should be protected? Here's what employment attorneys had to say.

(SHRM Online)



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