President Biden recently released an executive order directing the Federal Trade
Commission (the “FTC”) to “curtail the unfair use of non-compete clauses and other
clauses or agreements that may unfairly limit worker mobility.”
What does the executive order on non-competes say?
The executive order is not a mandate. However, it encourages the FTC to ban what it calls
the “unfair” use of non-competes and other restrictive covenants. The order is frustratingly
vague on details. Most notably, it does not specify what constitutes an “unfair” practice. (It
does not say, for example, whether all non-competes should be banned or whether there
should only be restrictions with respect to workers in certain wage or job categories.)
Non-compete agreements are typically regulated by states and not the federal
government. In 2016, the Obama Administration issued a call-to-action to state
governments, encouraging reforms to reduce their prevalence. While some states
responded by passing new legislation, only three states—California, North Dakota, and
Oklahoma—have banned non-competition agreements outright.
Much remains unknown about how the FTC will proceed, and whether any regulations will
survive legal challenges. In the meantime, companies can prepare themselves by looking
at their non-compete policies and considering alternative options for protecting client
relationships and confidential information.
If you have questions about any of your restrictive covenants, contact Jared Gardner, Nicole Gardner, or Tyler Peacock today.