Proposed Federal Non-Compete Legislation Could Have Unintended Consequences

Last week, Florida Senator Marco Rubio introduced the “Freedom to Compete Act” (the “Act”) proposing to amend the Fair Labor Standards Act (FLSA) of 1938 to ban non-competes for most non-exempt workers. The Act is broadly drafted to void any agreement that restricts “any work for another employer,” “any work in a specified geographical area,” and “any work for another employer that is similar” to the employee’s prior work. While it purports to void only non-compete agreements, the bill’s use of the sweeping language “any work” could be interpreted to ban not only non-compete agreements, but other post-employment restrictive covenants such as customer and employee non-solicitation agreements. Further, the Act (if passed) would purportedly apply retroactively to agreements entered into before its enactment.

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