President Biden Seeks to Regulate (and Potentially Ban) Non-Competes

By Scott McDonald, Michael Lotito, Melissa McDonagh, Jim Paretti and Jim Witz

On July 9, 2021, President Biden issued his Executive Order on Promoting Competition in the American Economy. Earlier in the day, the White House issued a press release announcing that the anticipated order would, “[m]ake it easier to change jobs and help raise wages by banning or limiting non-compete agreements and unnecessary, cumbersome occupational licensing requirements that impede economic mobility.” Now that the executive order has been issued, employers are wondering: are noncompete agreements with employees now illegal as a result of President Biden’s order?  Short answer – No – but employers should be on alert.

More aspirational in nature, President Biden’s order creates a new White House Competition Council and directs federal regulators to address a long list of different competition-related concerns – only one of which is noncompete agreements.  In essence, President Biden’s executive order directs the Federal Trade Commission (FTC) to pursue a rulemaking process that would ban or limit the use of noncompete agreements as a matter of federal law.  At this time, it is unclear whether the FTC will propose very broad limitations that could potentially ban all employee noncompete agreements, or whether the agency will take a more targeted approach, limiting regulation to restrict the use of noncompetes with lower-income employees (as several states have done), or certain employment sectors.

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