Earlier this month, a group of six United States Senators made a joint request for the Government Accountability Office (GAO) to investigate the impact of non-compete agreements on workers and the U.S. economy as a whole. This action suggests that the federal non-compete reform effort is not going away.

Recent Legislative Efforts

On February 18, 2019, we reviewed a new bill by Florida Senator Marco Rubio to prohibit non-competes for low-wage employees. That bill followed an effort in 2018 by Democrats in both houses of Congress to ban non-competes altogether. Although Senator Rubio’s bill represents a more limited attack on non-competes, we noted that it “suggests a level of bipartisan support that was not previously apparent.”

The Joint Letter

The recent joint letter to the GAO, issued on March 7, 2019, is signed by two Senators who were not involved in the prior legislative efforts: Democratic Senator Tim Kaine (VA); and Republican Senator Todd Young (IN). This represents additional evidence of bipartisanship on non-compete reform.

The joint letter does not formally oppose the use of non-competes. Nevertheless, from the Senators’ explanation for their request, it is clear that they believe the use of non-competes has become excessive, and that significant harm is being done to workers and the greater economy as a result.

In the letter, the Senators cite three ways in which non-competes allegedly are being abused:

  • The allegedly excessive imposition of non-competes on low-wage workers;
  • The alleged inability of workers to “engage in genuine negotiation over these agreements”; and
  • The belief that “most working under a non-compete were not even asked to sign one until after receiving a job offer.”

Further, the Senators allege that “[a]cademic experts and commentators from across the political spectrum have raised serious concerns about the use and abuse of these clauses[.]”

Based on the above-referenced concerns, the letter instructs the GAO to investigate the following questions:

  • What is known about the prevalence of non-compete agreements in particular fields, including low-wage occupations?
  • What is known about the effects of non-compete agreements on the workforce and the economy, including employment, wages and benefits, innovation, and entrepreneurship?
  • What steps have selected states taken to limit the use of these agreements, and what is known about the effect these actions have had on employees and employers?

Of note, these questions appear to address broader concerns about the use and impact of non-compete agreements than the discreet issues raised by the alleged “abuses” set forth above. The letter does not provide a deadline for the GAO to issue its report. However, the GAO’s explanation of how it handles investigation requests sets forth a six-step process, from Congress making the request to the issuance of the report. Further, while the GAO protocol does not offer a time-frame for every step, it does state that it “typically” takes “about 3 months” to simply design the scope of the investigation. Consequently, it would be reasonable to anticipate waiting months at least for the GAO to issue the report.

Where Does This Leave Us?

As noted above, the joint letter indicates that there is growing bipartisan support for restricting the use of non-competes on a nation-wide level. At the same time, by expressing the need for additional information about the use and impact of non-compete agreements on U.S. workers, the Senators may not move forward with further proposed non-compete legislation until they receive that information and take the time to fully digest its implications.

Employers with questions about the enforceability of restrictive covenants, including at the state level, are encouraged to contact a member of Jackson Lewis’s Non-Competes and Protection Against Unfair Competition Practice Group.

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Photo of Clifford R. Atlas Clifford R. Atlas

Clifford Atlas is a Principal in the New York City, New York, office of Jackson Lewis P.C. He is the Co-Leader of the Non-Competes and Protection Against Unfair Competition Practice Group.

Mr. Atlas works extensively with clients in developing and drafting employment contracts and restrictive covenant agreements, and developing programs to best protect clients’ confidential business information. He has significant experience in prosecuting as well as defending actions involving breach of non-competition and non-solicitation agreements, employee raiding, misappropriation of confidential information, tortious interference with contract, unfair competition, and related business claims. Mr. Atlas also has assisted clients in employment issues arising from corporate transactions.

Additionally, Mr. Atlas handles all types of employment discrimination, harassment, disability, wrongful discharge, and related employment tort, contract, wage-hour and employee benefits claims. He has tried cases in state and federal courts, and before administrative agencies. Mr. Atlas has argued numerous appeals to the United States Court of Appeals for the Second Circuit.

Mr. Atlas joined Jackson Lewis in 1985.

Photo of Erik J. Winton Erik J. Winton

Erik J. Winton is a Principal in the Boston, Massachusetts, office of Jackson Lewis P.C. He is the Co-Leader of the firm’s Non-Competes and Protection Against Unfair Competition practice group. His practice focuses on restrictive covenant drafting, counseling, litigation avoidance and litigation. He regularly provides valuable counsel to clients in New England and across the country regarding these issues.

Mr. Winton has extensive experience as a litigator, including successful first chair jury trial experience. He represents employers in federal and state courts and administrative agencies in matters involving discrimination claims based on race, sex, sexual preference, national origin, and disability; retaliation, whistle blowing, wage/hour claims and Department of Labor complaints; allegations of wrongful discharge and breach of contract under the common law; and claims for tortuous injury, such as defamation, infliction of emotional distress and interference with advantageous relations. Mr. Winton has prevailed on the vast majority of dispositive motions filed on his clients’ behalf, including several reported cases.

Mr. Winton’s practice emphasizes advising employers regarding how to comply with the full range of federal and state labor and employment laws. This includes advising clients on issues relating to disability and leave management, reductions in force, wage and hour laws and workplace safety. Mr. Winton also drafts and negotiates executive employment and severance agreements on behalf of both employers and executives.

Mr. Winton speaks frequently regarding employment law issues. He joined the firm in 2000 after five years as a litigator at Fitzhugh & Associates (now Fitzhugh & Mariani, LLP), a litigation boutique with offices in Boston and Hartford, Connecticut. While attending law school, he was on the staff of the Cardozo Arts & Entertainment Law Journal.

Photo of Colin A. Thakkar Colin A. Thakkar

Colin Thakkar is the Knowledge Management (“KM”) Attorney for Jackson Lewis P.C.’s Non-Competes and Protection Against Unfair Competition Practice Group, and is based in the Jacksonville, Florida, office.

In his role, Mr. Thakkar serves as a subject-matter expert on restrictive covenant agreements and unfair competition litigation; creates and manages legal and electronic resources and materials to provide innovative client services; serves as a resource for other practice group members; monitors and analyzes regulatory and case law developments; and contributes to the firm’s blogs and legal updates.

Since 2005, Mr. Thakkar has represented and counseled employers nationwide with regard to federal, state, and local employment laws. In addition to representing companies in non-compete, non-solicitation, and other unfair competition lawsuits, he has defended employers against claims alleging discrimination, unpaid wages, ERISA violations, and other employment-related matters. Mr. Thakkar also has significant experience representing and advising employers regarding traditional labor law issues, including labor arbitrations, unfair labor practice charges, and the interpretation of collective bargaining agreements.