Recently, President Biden issued an Executive Order titled, “Promoting Competition in the American Economy.” Notably, among other things, the Executive Order recommends that the Federal Trade Commission (“FTC”) curtail the use of non-compete agreements.
The Executive Order seeks to “. . . address agreements that may unduly limit workers’ ability to change jobs” by encouraging the Chair of the FTC 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 non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.” In a Fact Sheet that accompanied the Executive Order the Biden Administration further outlined the seriousness of its policy goals stating that it aims to “tackle some of the most pressing competition problems across our economy” and intends to “make it easier to change jobs and help raise wages by banning or limiting non-compete agreements . . .”
The Executive Order and accompanying Fact Sheet do not change current non-compete law, and do not nullify current non-compete agreements. Instead, they are policy goals of the Biden Administration. As such, non-compete law is still currently controlled by state law.
The Executive Order and accompanying policy statements do, however, show that the Biden Administration is serious about changing non-compete law and is serious about limiting the use of non-compete agreements. As such, employers can expect that the FTC will issue some type of guidance, regulation, or rule addressing the Biden Administration’s concerns – it is unclear when the FTC plans to do so or what the scope of that rule will be. Employers should continue to monitor the situation and take this time to review their non-compete, non-solicitation, and confidentiality agreements to ensure that each is enforceable and not broader than necessary to protect legitimate business interests.