A Spin on Things: Pending Legislation Seeks to Render Restrictive Covenants Unenforceable if an Employer Takes Action under Mandatory Vaccine Policies

Pending legislation on both the federal and state level attempts to restrict employers’ ability to enforce restrictive covenants if they choose to mandate vaccinations and make employment decisions based on those policies, regardless of whether that policy or decision is mandated by federal law. 

The Employment Freedom for All Act (H.R. 5851), sponsored by nine House members and introduced on November 3, 2021, seeks to “void existing non-compete agreements for any employee who is fired for not complying with an employer’s COVID-19 vaccinate mandate.” The bill has been referred to the Committee on Education and Labor and the Committee on Energy and Commerce for further consideration. As currently written, the law would take effect 60 days after the date of enactment and render any non-compete agreement between an employer and former employer unenforceable when the former employee is fired for not complying with the employer’s vaccinate mandate. The bill defines “non-compete agreement” as an agreement that restricts an employee from performing any of the following after the employment relationship is terminated: (1) any work for another employer for a specific period of time, (2) any work in a specified geographic area, and (3) any work for another employer that is similar to such employee’s work for the employer.

While such a bill is unlikely to pass the current Democratic-controlled Congress, it sheds light on one particular tool considered by those who oppose employment vaccine mandates in various parts of the country. In fact, Texas and Tennessee have already introduced similar bills in their legislatures. Texas House Bill 119 states that a covenant not to compete is unenforceable against an employee who is terminated because “the employee refused or failed to receive a COVID-19 vaccination required by the employer.” This bill was referred to State Affairs on October 12, 2021. Tennessee’s House Bill 9003 prohibits the enforceability of non-competes, non-solicits, non-disparagement, and confidentiality clauses entered into or modified after the effective date of the Act if the employer requires the employee to receive a vaccine as a condition of employment. 

Tennessee takes it a step further and renders any such covenant unenforceable “upon notice to the employee of the requirement to receive the vaccine”—not making the enforceability dependent on termination. Interestingly, Tennessee’s bill defines “private employer” as an individual or legal entity that employs one or more employees and that is not required to carry workers’ compensation under the Workers’ Compensation Law (which generally means all employers with one to four employees are subject to the pending legislation as Tennessee employers with five or more employees are generally required to secure workers’ compensation coverage).  It remains unclear whether this was a mistake or intentionally meant to cover smaller private employers only.

Adding to murkiness of current waters, these pending bills create potential hurdles for employers in developing their COVID-19 policies, as required by federal law for some employers (and if the OSHA ETS withstands legal challenges). Although none of the pending legislation seems to be moving quickly, depending on location, employers should consider the potential effect on enforceability of non-compete agreements when deciding to terminate an employee for not complying with a mandatory vaccine policy.