I warned — didn’t I? — you that President Biden was preparing to tell the Federal Trade Commission to either ban or curtail private employers from using non-competition agreements.
On Friday morning, the White House released this Fact Sheet foreshadowing an Executive Order that would encourage the FTC to ban or limit non-compete agreements.
On Friday afternoon, the Executive Order followed. In it, the President directed the FTC “[t]o address agreements that may unduly limit workers’ ability to change jobs” and “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.”
I checked the FTC’s website for any statement from Chair Lina Khan. But, all we’ve got so far is a press release on how the FTC will consider revisions to merger guidelines. However, many publications, include this report from NPR, note that Ms. Khan penned a 2019 law journal article in which she argued that noncompetition agreements “deter workers from switching employers, weakening workers’ credible threat of exit, and diminishing their bargaining power.”
Still, the President has not ordered a full ban on non-competes. Not only is that too aggressive, but the FTC’s rulemaking may not survive a legal challenge. Rather, as noted in my post on Friday, the low-hanging fruit is the agreements between employers and blue-collar employees, such as folks in construction, retail, or hospitality.
The “x” factor is how the FTC will target “other clauses or agreements that may unfairly limit worker mobility.” Non-solicitation agreements? No-poach agreements? Unclear.
So what should employers do now? I have three ideas:
- Stay informed. I’ll keep you updated on the latest developments. So, if you aren’t subscribed to this blog yet, you can fix that here.
- Comply with state law. As the NPR article notes, “three states — California, North Dakota and Oklahoma — already ban noncompete agreements, and close to a dozen states prohibit their use with low wage workers.” DC also has banned non-competes. States that allow non-competes still restrict their use. So, tread carefully.
- Be selective. Do not require every employee to sign a non-compete with the idea that you’ll selectively enforce them later. Instead, you should only have those employees sign one where there is a legitimate business reason.