Provided by: Jennifer Kirschenbaum, Esq
August 3, 2021
Written by Michael Foster, Esq.;Mfoster@kirschenbaumesq.com
I recently read that the Biden Administration issued an Executive Order curtailing the use of non-compete clauses. Does this mean they are not enforceable?
While President Biden did issue an Executive Order related to curtailing the use of non-compete clauses, the Executive Order is not a federal ban on non-compete agreements.
On June 9, President Joe Biden issued his Executive Order on Promoting American Competition in the Economy. While the Executive Order covered many different policy goals across various industries, employers should note that it specifically discussed non-compete agreements.
The Executive Order instructs the Federal Trade Commission (FTC) “to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.” The purported goal of this instruction is to “make it easier to change jobs and help raise wages by banning or limiting non-compete agreements…that impede economic mobility.”
The Executive Order is not a federal ban on non-compete agreements. It merely instructs the FTC to consider this issue. It is not currently clear how the FTC will interpret instruction to curtail the use of non-compete clauses. However the Executive Order does reflect a trend, specifically of the Biden administration to restrict the use of non-competes and “promote the interests of American workers, businesses, and consumers.” This sentiment is consistent with changes in many states where legislatures are restricting such agreements. Most recently, California, Oregon, Nevada, and Illinois have proposed or passed bills curbing the use of non-competes.
While the FTC has power to engage in a rule-making process, its authority to regulate, or even ban, non-competes remains to be seen and will be heavily disputed. Any ban would likely have to come from federal legislation, which has yet to gain significant traction. However, given the prevalence of non-compete clauses in the healthcare industry, this is certainly a significant development that is worth keeping a close eye on.