The Free Agent Act

The problem

A noncompete is a promise, signed as a condition of taking a job, not to take a similar one for a period after leaving. It was once a term negotiated by executives with lawyers. It is now a form in the onboarding packet. The Federal Trade Commission estimated in 2024 that about 18 percent of American workers, roughly 30 million people, were bound by one, and that they reached far below the boardroom: fast-food workers, hairdressers, warehouse staff, and, in one case that made the news, the people who assemble sandwiches. A worker who cannot leave for a competitor cannot credibly threaten to, and a worker who cannot threaten to leave does not get a raise.

The evidence on what noncompetes do is unusually clear, because states have run the experiment. California has refused to enforce them since 1872, and the industry most dependent on the free movement of engineers, which is the one it built, is the industry that proves they are not necessary. When Hawaii banned noncompetes for technology workers in 2015, wages for new hires in the sector rose by about 4 percent and job mobility rose by 11 percent. When Oregon banned them for lower-wage workers in 2008, hourly wages rose by 2 to 3 percent. Minnesota banned them outright in 2023. The pattern in every study is the same: where noncompetes are enforced, wages are lower, mobility is lower, and new firms are fewer.

The FTC issued a rule in April 2024 banning nearly all noncompetes. A federal court in Texas held in August 2024 that the Commission had no authority to issue it, and on September 5, 2025 the Commission voted to abandon the rule and withdraw its appeals, announcing that it would instead challenge noncompetes one employer at a time. Whatever the merits of the legal question, the practical result is settled: the ban will come from Congress or it will not come.

№ 013 argued for the way Americans already work: the second job, the portable benefit, the end of the moonlighting clause. The noncompete is the clause that stops the first job from ending.

The proposal

The Free Agent Act: noncompete agreements are unenforceable for every worker, by federal statute, with two exceptions. A noncompete attached to the sale of a business remains enforceable against the seller. And an employer may restrict a departing worker from competing for up to twelve months only while paying the worker's full salary and benefits for the period. Trade secret law and confidentiality agreements are untouched.

How it would work

1. Unenforceable, everywhere. A noncompete clause in an employment contract, for any worker at any wage, is void, and an employer who requires one or threatens to enforce one is liable for the worker's damages and costs. The rule covers the disguised forms too: a "non-solicitation" clause written so broadly that it bars ordinary work, and a training-repayment clause priced to make leaving impossible.

1. The sale of a business. A person who sells a company and promises not to open a competing one across the street is making a different kind of promise, for a price, and it stays enforceable. The exception is drawn narrowly around a genuine sale of a substantial ownership stake, not the "sale" of a one percent share dressed up to import a noncompete.

1. Garden leave. An employer who believes a departing worker knows too much to work for a competitor tomorrow may keep the worker out for up to twelve months, on one condition: the employer pays the worker's full salary and benefits for every day of the restriction. This is the English practice, and it prices the restriction honestly. An employer who will not pay a year's salary to keep a worker out has told the court what the restriction was worth.

1. Trade secrets, untouched. The federal and state trade secret laws remain in full force. A worker who takes a customer list or a formula to a competitor is liable as before. What the Act ends is the use of the noncompete as a substitute for proving that a secret was actually taken, which is what it has become.

1. The states may go further. A state that bans garden leave too, or the sale-of-business exception, may. None may enforce a noncompete the Act voids.

1. Existing contracts. Existing noncompetes become unenforceable on the Act's effective date, six months after enactment, and employers must notify affected workers in writing. A worker cannot be held to a promise the law has declared void because it was signed before the law changed.

The numbers

The workers. About 30 million, 18 percent of the workforce, by the FTC's estimate; other surveys put the figure higher when workers who are unsure whether they signed one are counted.

The wages. The FTC estimated its 2024 rule would raise wages by about $400 to $488 billion over ten years; the state studies, more conservatively, suggest gains of 2 to 4 percent for affected workers. Even at the low end, that is tens of billions of dollars a year moving from employers who no longer need to pay to retain workers to the workers themselves.

The firms. Studies of state noncompete enforcement find fewer new firms, and fewer new firms founded by former employees, where noncompetes are strong. The Act's effect on new business formation is likely positive and not precisely estimable, and this proposal does not put a number on it.

The cost. Garden leave costs the employer who uses it a year's salary per restricted worker, which is the point, and costs the Treasury nothing.

The honest objections

"Without noncompetes, companies cannot protect the investments they make in training and in secrets." Trade secret law protects secrets; item 4 leaves it intact and it has protected Californian companies for 150 years. Training is protected by the ordinary means: a worker who is well trained and well paid stays. A company that needs a contract to keep a trained worker has told the worker what it thinks of the pay, and the Act lets the worker act on that information.

"Executives with real access to strategy should be bound." They may be, under item 3, for a year, at full pay. An employer who will not pay a departing executive's salary to keep them from a competitor has admitted that the harm was smaller than the salary. The garden-leave rule sorts the genuine cases from the reflexive ones by price.

"This should be left to the states, which have been sorting it out." The states have sorted it out for the workers in the states that have acted, and left the rest bound. A worker in Texas competes in the same national labour market as one in California; the case for a national rule is that the market is national, and the Commission's failure shows that the rule has to come from Congress.

"The FTC's own economists overstated the benefits." Possibly, and this proposal leans on the state studies rather than the Commission's projection. The state studies are consistent, peer-reviewed, and drawn from actual bans in actual states. Their estimate of a few percent in wages, across tens of millions of workers, is enough.

"Banning noncompetes will lead employers to sue over trade secrets instead." Some will, and those suits require proof that a secret was taken, which is the correct standard. A noncompete requires no proof of anything. Replacing a rule that bars work without evidence with one that bars theft on evidence is the Act's purpose.

Sources

• Federal Trade Commission, Non-Compete Clause Rule, 89 Fed. Reg. 38342 (May 7, 2024), including the Commission's estimates of coverage and wage effects; FTC statement and vote of September 5, 2025 acceding to vacatur
• Ryan, LLC v. Federal Trade Commission, No. 3:24-cv-00986 (N.D. Tex. Aug. 20, 2024)
• Balasubramanian, Chang, Sakakibara, Sivadasan and Starr, "Locked In? The Enforceability of Covenants Not to Compete and the Careers of High-Tech Workers," Journal of Human Resources (2022), on the Hawaii ban
• Lipsitz and Starr, "Low-Wage Workers and the Enforceability of Noncompete Agreements," Management Science (2022), on the Oregon ban
• California Business and Professions Code § 16600; Minnesota Statutes § 181.988 (2023)
• Proposals № 013 (The Portfolio Act); № 084 (The Wage Theft Register); № 085 (The Licensing Passport)