[Congressional Record Volume 169, Number 21 (Wednesday, February 1, 2023)]
[Senate]
[Pages S207-S208]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. MURPHY (for himself, Mr. Young, Mr. Kaine, and Mr. 
        Cramer):
  S. 220. A bill to prohibit certain noncompete agreements, and for 
other purposes; to the Committee on Health, Education, Labor, and 
Pensions.
  Mr. MURPHY. Madam President, if you were working for the sandwich 
shop Jimmy John's--I don't know if the Presiding Officer has ever had a 
Jimmy John's sandwich. It is a pretty good sandwich. If you were 
working for Jimmy John's sandwich shop in the middle of the last 
decade, around 2014, 2015, 2016, you might have been required to sign a 
contract with Jimmy John's to make sandwiches. Buried in that contract, 
as a fast food worker at Jimmy John's in 2014, 2015, 2016, was 
something called a noncompete clause.
  A lot of Americans have heard of noncompete clauses. They think of 
them as applying to executives, individuals who make a lot of money, 
who possess really intricate, detailed information about a product. But 
Jimmy John's made everybody who came to work in many of their sandwich 
shops sign a noncompete agreement. The noncompete agreement for Jimmy 
John's sandwich makers said that if you ever left Jimmy John's, you 
would not be able to work at any business within 2 to 3 miles of any 
Jimmy John's for any company that made over 10 percent of its revenue 
from selling ``submarine, hero-type, deli-style, pita, and/or wrapped 
or rolled sandwiches'' for 2 years. Low-income, minimum-wage workers at 
Jimmy John's, if they tried to leave that job, were prohibited from 
going to work for Subway or going to work for D'Angelo's or maybe even, 
according to this definition, McDonald's or Burger King.
  Of course, that sounds patently ridiculous. Why would you need to 
protect the intellectual secrets of sandwich making at Jimmy John's by 
applying noncompete agreements for these low-income workers? But this 
wasn't and isn't an anomaly. In fact, one out of six hospitality 
restaurant workers, by some studies, has a noncompete agreement. Today, 
noncompete agreements apply to one in five American workers. That is 30 
million workers.

[[Page S208]]

  Amazon warehouse workers were required for a long time to sign 
noncompete agreements. I read a story the other day of a company called 
Camp Bow Wow that pays people to pet-sit. They required their pet 
sitters to sign noncompete agreements.
  The reason that noncompete agreements are being used at industrial-
level scale today is not to protect the trade secrets of sandwich 
making or pet sitting; it is to keep wages down. It is to prevent low-
income workers from being able to go out and get a better job and thus 
pressure their existing employer to increase wages. This practice has 
become pervasive throughout our economy, and it is just a fundamental 
restraint on free trade.
  Now, many of these noncompete agreements end up being nonenforceable. 
A lot of State laws don't allow you to have a noncompete agreement for 
a low-wage worker. But in practice, it doesn't really matter because 
when that individual tries to leave and they get told they can't 
because of a noncompete agreement, they don't know that it is 
nonenforceable in State law or if they do know, they don't have the 
resources to contest the cause in a court of law. So what do they do? 
They just end up staying.
  The FTC filed a complaint in January of this year against two 
Michigan-based companies that required their security guards to sign 
noncompete agreements prohibiting them from working for a competing 
business within a 100-mile radius. Despite the fact that these security 
guards were making very low wages, the company's noncompete included a 
restriction that required the employee to pay a $100,000 penalty for 
any alleged violation of the clause. The intention here is simply to 
bind the employee to the company, to give them no ability to bargain 
for a higher wage because they might be able to get a better wage 
somewhere else. There is no proprietary information that those security 
guards possess.
  What is equally interesting is that there is increasingly great data 
to show that there is actually no reason to have noncompete agreements 
even for higher income workers. The imposition of noncompete agreements 
on low-wage workers is primarily about just trying to restrain wages, 
but the imposition of noncompete agreements on higher income workers is 
about impeding innovation. It is about a company that doesn't want 
competitors, so they bind their executives to noncompete agreements 
such that their executives can't go work for a competing company or 
can't go out and start a company that may compete.
  What is so maddening is that there are plenty of protections in our 
existing law that protect companies from intellectual property theft or 
patent theft. If what you worry about is your trade secrets being 
appropriated by a competitor, well, the law already protects you from 
that. You don't have to deny your employees or your executives the 
ability to go work for another company.
  California rightly has the reputation as probably the world's center 
of innovation, right? More startups, more world-changing companies have 
come out of California than any other State and probably than any other 
part of the world. California was the first or one of the first in this 
country to ban noncompete agreements. California decided it didn't need 
noncompete agreements to protect intellectual property in a State that 
probably has a greater interest in protecting intellectual property 
than any other State. In fact, California's economic engine is 
dependent on their prohibition of noncompete agreements because by 
prohibiting noncompete agreements, California has a culture in which 
startups are encouraged, in which executives can leave one company and 
start another.
  Eric Yuan was an executive at Cisco Webex. If he wasn't working in 
California, he might have had a noncompete agreement applied to him, 
but he didn't, and so he could leave and start a company that was 
arguably competing with Cisco Webex--a company called Zoom.
  To many economists on the right and the left, this is becoming a no-
brainer. Noncompete agreements are bad for wage growth. Noncompete 
agreements are bad for innovation. Noncompete agreements are bad for 
low-income workers. Noncompete agreements are bad for high-income 
workers.
  So today I am on the floor to talk about what the data tells us about 
noncompete agreements as a means to encourage my colleagues to take a 
look at a piece of legislation that we are introducing today, the 
Workforce Mobility Act, a pretty simple piece of legislation that would 
ban the use of noncompete agreements for both high-income and low-
income workers.
  It is a bipartisan piece of legislation. Senator Todd Young, Senator 
Kevin Cramer, Senator Tim Kaine, and I are introducing this bill today. 
I don't know that there is another policy that the four of us can find 
common ground on, but we find common ground on this issue because maybe 
if you are a progressive, you come to this issue through the rights of 
workers and boosting their wages. If you are a conservative, you come 
to this issue through the restraint on free trade that exists through 
the perpetuation of noncompete agreements. But all across America, this 
is a pretty bipartisan issue, and here in the Senate, it is bipartisan 
as well.
  I am glad that the FTC, just a week or so ago, announced that they 
were going to undertake a rule to ban noncompete agreements. I 
congratulate the Biden administration and the FTC for taking a 
leadership role. It may be that that rule, once it is adopted and in 
place, will do the work of this legislation, but we know that rules are 
only as good as the commitment of one particular administration.
  So my hope and my recommendation is that no matter what the FTC does 
when it comes to restrictions on noncompete agreements, that we pass 
the Workforce Mobility Act so that we provide a guarantee in the law 
that noncompete agreements are not going to stand in the way of wages 
rising or small businesses starting.
  There is a lot of public support out there as 92 percent of voters 
think that it is way too hard today to start or grow a new business and 
as 80 percent of voters--again, across party lines--support policies 
that allow people who want to start a new business more freedom by 
reducing the restrictions that come when you try to venture out on your 
own. Increasingly, one of the primary restrictions that exists for 
people who want to start a new business, who want to become 
entrepreneurs, are these noncompete agreements.
  So I am coming to the floor today to recommend this bipartisan piece 
of legislation to my colleagues, to point to the States that have 
already adopted these restrictions, and to show how not only does the 
sky not fall when you get rid of noncompete agreements but that 
startups flourish and that wages increase.
  Finally, I come to recommend to my colleagues that, in an environment 
where it is going to be a little harder to find agreement between 
Republicans and Democrats, this is a place where we can find that 
common ground. In one piece of policy, we can stick up for low-income 
workers and the free market. This is something that we can do together 
to help raise wages and to help power our economy.

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