The reporting on this issue has been confusing since President Biden signed an Executive Order on July 9th that addressed everything from airline refunds, to internet access, to importing prescription drugs from Canada. But buried in the Order was a reference to a ban on non-competition agreements. Let’s break down what we know and what we can expect.
On July 9, 2021, President Biden signed an Executive Order promoting competition in the American economy. His order is ultimately intended to increase competition among businesses, which in turn will lower prices of consumable products for families, increase wages, and promote innovation and faster economic growth. Economists have found that as competition declines, productivity growth slows, business investment and innovation decline, and income, wealth, and racial inequality widen. In other words, the administration is looking to level the playing field.
The Order included 72 initiatives by more than a dozen federal agencies to promptly tackle some of the most pressing economic challenges. One such initiative was a proposal for a nationwide ban on public sector non-competition agreements, which impacts between 36-60 million workers. Non-competition agreements restrict employees from leaving one company and either starting a similar business or working for a competitor.
Rest assured that the President, alone, does not have the authority to ban the use of non-competes by private employers. However, his Order encourages the Chair of the Federal Trade Commission (FTC) to work with the rest of the Commission to exercise the FTC’s statutory rulemaking authority under the FTC Act to “curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.”
Any change will not occur overnight. Expect a long and heated debate over this issue by pro-employer groups.
Many states, including the District of Columbia, either already ban non-competes or restrict them based on income or job function.
If you are seeking guidance about the legality of your existing employment agreements or restrictive terms for your workers, please feel free to contact Laura Rubenstein at lrubenstein@rkwlawgroup.com or (443) 379-4013.
