Prohibiting noncompete agreements

(a) Prohibition (1) In general Except as provided in subsection (b), no person shall enter into, enforce, or attempt to enforce a noncompete agreement with any individual who is employed by, or performs work under contract with, such person with respect to the activities of such person in or affecting commerce. (2) Effect of agreements Except as provided in subsection (b), a noncompete agreement described in paragraph (1) shall have no force or effect. (b) Exceptions (1) Sale of goodwill or ownership interest (A) In general A seller of a business entity may enter into an agreement with the buyer to refrain from carrying on a like business within a specified geographic area described in subparagraph (C), if the buyer, or any person deriving title to the goodwill of the business entity or an ownership interest in the business entity from the buyer, carries on a like business in such specified geographic area. (B) Senior executive officials with severance agreements (i) In general Subject to clause (ii), a buyer or seller of a business entity may enter into a noncompete agreement with a senior executive official who has a severance agreement described in clause (iii) that restricts the senior executive official from performing, within a specified geographic area described in subparagraph (C), any work that is similar to the work that the senior executive official performed for the buyer or seller, if the buyer, or any person deriving title to the goodwill of the business entity or an ownership interest in the business entity from the buyer, carries on a like business in such specified geographic area. (ii) Time-limited agreement A noncompete agreement described in clause (i) may not restrict the senior executive official as described in such clause for a period that is more than one year. (iii) Severance agreement A severance agreement described in this clause is an agreement between the buyer or seller of a business entity and a senior executive official that— (I) is part of the terms and conditions of the sale; and (II) requires monetary compensation for the senior executive official in the event of termination of the employment of the senior executive official at an amount that is not less than the compensation that the senior executive official is or would be reasonably expected to receive from the buyer during the 1-year period following the sale. (C) Specified geographic area A specified geographic area described in this subparagraph is a geographic area— (i) that is specified in an agreement described in subparagraph (A), or a noncompete agreement described in subparagraph (B), regarding a business entity; and (ii) in which such business entity, including any division or subsidiary of such business entity, conducted business prior to the agreement or noncompete agreement. (2) Partnership dissolution or disassociation (A) In general Any partner of a partnership may enter into an agreement with any other member of the partnership that, upon the dissolution of the partnership or dissociation of the partner from such partnership, the partner will refrain from carrying on a like business within a specified geographic area described in subparagraph (B), if any other member of the partnership, or any person deriving title to the partnership or the goodwill of the partnership from any other member of the partnership, carries on a like business in such specified geographic area. (B) Specified geographic area A specified geographic area described in this subparagraph is a geographic area— (i) that is specified in an agreement described in subparagraph (A); and (ii) in which any business of the partnership has been transacted prior to the agreement.