On September 1, 2022, Representative Mike Garcia (CA-25) introduced H.R. 8755, titled The Restoring Workers' Rights Act (the "RWRA"), which would effectively ban non-compete agreements for non-exempt (low-to-mid wage) employees nationwide. If enacted, the RWRA would follow similar legislation in states such as Illinois, Colorado, Washington, and others that have imposed statutory income minimums that must be met in order for employers to bind employees to post-employment restrictive covenants.
Problematically, the RWRA defines a "non-compete agreement" as any agreement that imposes restrictions on the performance of "Any work for another employer for a specified period of time" or "in a specified geographical area" or "that is similar to such employee's work for the employer that is a party to such agreement." While there is a carve-out for agreements prohibiting the disclosure of trade secrets, the RWRA would ban agreements far beyond non-compete agreements and could also operate to ban confidentiality agreements, as well as customer and employee non-solicit agreements.
Employers should be mindful of the RWRA and recent state law analogs that impose income or other qualitative or quantitative caps on the use of restrictive covenants. Employers would be well advised to identify their non-exempt employees and substantially curtail such employees' access to confidential information and further constrain them from developing relationships and goodwill with customers. While the RWRA and similar state statutes may increase worker mobility and prevent the abuse of non-compete agreements by some employers, these laws may continue to yield unintended consequences. For example, if employers cannot trust newer employees with confidential information or client relationships, such employees may be deprived of career advancing opportunities. Moreover, employers may be hesitant to invest in innovation if they cannot fully protect innovation or intellectual capital through the use of restrictive covenants. In short, laws like the RWRA run the risk of harming the very employees they seek to help.
We will be monitoring the progress of the RWRA and provide updates on this proposed law.
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