Workers’ Right to Compete Act
- Sponsor
- Rep. Khanna, Ro [D-CA-17]
- Committees
- Energy and Commerce Committee (primary)
- Last action
- Oct 22, 2026
Bottom line
This bill aims to significantly enhance worker mobility and wage growth by broadly restricting the use of noncompete agreements for lower and middle-income earners, while preserving protections for trade secrets and confidential business information.
What it actually does
This bill prohibits employers from entering into, enforcing, or attempting to enforce noncompete agreements with workers whose annualized cash compensation is less than $100,000, a threshold adjusted annually for inflation. It also requires employers to notify affected individuals that such agreements are unenforceable, including those entered into before the bill's enactment. The Federal Trade Commission and State Attorneys General are granted enforcement authority.
Proponents argue
Supporters argue that noncompete agreements suppress wages, stifle innovation, and limit worker mobility, particularly for those with lower incomes who have less bargaining power. They contend that this bill would empower workers to seek better opportunities, fostering competition and economic growth across various sectors.
Opponents contend
Opponents might argue that noncompete agreements are essential for businesses to protect proprietary information, trade secrets, and significant investments in employee training. They may contend that restricting these agreements, even for lower-income workers, could lead to unfair competition, intellectual property theft, and a disincentive for companies to invest in employee development and specialized skills.
The bill is concise and clearly written, making it accessible for a quick and thorough review by an informed reader.
Section 2(1)
Defines "Confidential Business Information"
This section defines what constitutes "confidential business information" that employers can legitimately protect, explicitly excluding general knowledge, skills, training, or publicly available information. This distinction is crucial because the bill allows for confidentiality agreements, but only for legitimate confidential business information or trade secrets, not for general skills acquired during employment.
Supporters argue
Supporters argue this definition is vital to prevent employers from broadly classifying general skills as "confidential" to circumvent the spirit of the noncompete prohibition. It ensures workers retain their acquired expertise and are not unduly restricted.
Critics contend
Some employers might argue that the definition is too narrow, potentially making it harder to protect certain types of valuable business information that don't strictly meet the "trade secret" threshold but are still critical to their competitive advantage.
Tradeoffs
This provision balances an employer's need to protect proprietary information against a worker's right to use general skills and experience gained on the job, aiming to prevent overreach in restrictive covenants.
Section 2(2)
Defines "Noncompete Agreement"
This section broadly defines a "noncompete agreement" as any agreement that restricts an individual from performing work for another person after their current working relationship ends, based on a specified period of time, geographical area, or similarity of work. This comprehensive definition aims to capture various forms of restrictive covenants that limit post-employment opportunities.
Section 3(a)(1)
Prohibits Noncompete Agreements for Lower-Income Workers
This core provision prohibits persons from entering into, enforcing, or attempting to enforce noncompete agreements with individuals whose actual or expected annualized cash compensation is less than $100,000. This threshold will be adjusted annually for inflation, ensuring its relevance over time.
Section 3(a)(3)
Declares Prohibited Noncompete Agreements Unenforceable
This provision explicitly states that any noncompete agreement prohibited under the Act shall be unenforceable, including any agreement entered into before the date of enactment of this Act. This retroactive unenforceability is a significant aspect of the bill, immediately nullifying existing agreements for covered workers.
Section 4
Requires Employers to Notify Workers of Unenforceability
This section mandates that employers must provide written notice to current and former employees or contractors, who are covered by the prohibition, that any noncompete agreement they signed is unenforceable. This notice must be provided within 30 days of enactment for existing agreements or 30 days after the commencement of any new employment or contractual relationship.
Section 5(a)
Grants FTC Enforcement Authority
This provision designates violations of the noncompete prohibition and the notice requirement as unfair or deceptive acts or practices under the Federal Trade Commission Act. It grants the FTC full authority to enforce these provisions, including powers related to investigations, penalties, and consumer redress.
Section 5(b)
Grants State Attorneys General Enforcement Authority
This provision allows State Attorneys General to bring civil actions on behalf of their residents in appropriate state or federal courts to enjoin violations, compel compliance, obtain damages, restitution, or other equitable relief. It also explicitly preserves existing state powers to bring actions under state laws.
Section 6
Preserves Stronger State Noncompete Protections
This section explicitly states that the Act does not preempt or supersede any state law that provides greater protection against noncompete agreements than those provided under this Act. This means states can maintain or enact stricter noncompete bans or regulations, ensuring the federal law acts as a floor, not a ceiling, for worker protections.
Section 7
Clarifies that Confidentiality Agreements are Permitted
This section clarifies that the Act does not prohibit employers from entering into agreements with individuals to protect trade secrets or confidential business information, even after the working relationship ends. This ensures that legitimate intellectual property protection mechanisms remain intact, distinct from broad noncompete restrictions.
Defines "cash compensation" for the $100,000 threshold, explicitly including salary, wage, overtime pay, commission, and cash bonus, but specifically *excluding* equity or equity-based compensation.
Section 3(b)
Why it matters:While standard legislative practice for definitions, the exclusion of equity is a significant policy decision that determines who is covered, rather than a purely technical detail.
Case for: Supporters would argue this focuses the protection on workers who primarily rely on cash income and are less likely to have significant equity stakes, which often come with different types of retention incentives and are typically associated with higher-level positions.
Case against: Critics might argue that excluding equity could create a loophole, allowing companies to structure compensation to keep workers below the cash threshold while still offering some equity, or that it doesn't fully capture the total compensation of some workers, particularly in industries like tech where equity is common even at moderate income levels.
Estimated impact: Significantly impacts which workers are covered by the noncompete ban, potentially excluding many startup employees or those in industries where equity is a common part of compensation, even if their cash salary is below the threshold.
Specifies how the annualized rate of cash compensation is determined. For current employees/contractors, it's at the time the agreement is imposed or enforcement is sought. For former employees/contractors, it's at termination. Variable compensation (commissions, bonuses) is calculated based on the preceding 12 months for those employed at least 12 months, or only guaranteed amounts for those employed fewer than 12 months.
Section 3(a)(4) and (5)
Why it matters:Standard legislative practice for technical implementation details, ensuring clarity in how the compensation threshold is applied in various employment scenarios.
Case for: Proponents argue these rules are necessary for clarity and fairness in applying the compensation threshold, preventing disputes over how variable pay is counted and ensuring consistent application across different employment durations.
Case against: Some employers might find the calculation rules for variable compensation complex, especially for new hires or those with highly fluctuating earnings, potentially leading to administrative challenges and compliance difficulties.
Estimated impact: Crucial for determining the exact scope of workers covered by the prohibition, especially for those with significant variable pay components, and for ensuring equitable application of the law.