Employers Take Note—Noncompete Times, They Are a-Changin’

President Biden’s July 9 executive order on promoting competition in the American economy marks the first step towards delivering on his broad campaign promise to eliminate noncompete and no-poach agreements that hinder the ability of employees to seek higher wages, better benefits, and improved working conditions.

The order directs several federal departments and agencies to take action or provide input on 72 items that target various industries, including advertising, air travel, farming, financial services, journalism, shipping, telecommunications, and technology. It aims to increase competition in the labor market by encouraging the Federal Trade Commission to ban or limit noncompete agreements, stating:

To address agreements that may unduly limit workers’ ability to change jobs, the Chair of the FTC is encouraged to consider working with the rest of the Commission to exercise the FTC’s statutory rulemaking authority under the Federal Trade Commission Act to curtail the unfair use of noncompete clauses and other clauses or agreements that may unfairly limit worker mobility….

The order does not detail how or when the FTC should take action. Indeed, it mentions noncompetes only twice, the provision quoted above and the additional statement: “Powerful companies require workers to sign noncompete agreements that restrict their ability to change jobs.” 

The language of the order has led to much speculation regarding what will happen next and what the FTC will propose. Coupled with the already ever-changing patchwork of state laws restricting non-competition agreements and proposed (and re-proposed) federal legislation, the EO leaves open many questions in the already murky legal landscape relating to restrictive covenants.

 

 

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