On July 9, 2021, President Joe Biden issued an Executive Order expressing a desire to encourage and stimulate a fair, open, and competitive marketplace in the United States. Section 1 of the Executive Order states, “Robust competition is critical to preserving America’s role as the world’s leading economy.” However, the desire to reinvigorate competition throughout the United States comes with more regulations for major companies, including restrictions on the use of non-compete clauses and agreements against employees. Or does it?
Throughout the Executive Order, President Biden establishes a “whole-of-government” approach to achieve the goals discussed in Section 1. Section 2(d) provides a list of statutes that “charge a number of executive departments and agencies to protect conditions of fair competition in one or more ways.” The Federal Trade Commission (“FTC”), the agency responsible for the potential changes to use of non-compete agreements, is included in that list. Section 4(c) provides for the creation of the White House Competition Council (“Council”), tasked with ensuring each agency operates in a manner that promotes fair competition. Though the Council does not include the Chair of the FTC, the Chair is invited to participate “to the extent consistent with their respective statutory authorities and obligations.” Section 4(g). The Executive Order encourages the Council to act in accordance with Section 1; however, “[t]he Council shall not discuss any current or anticipated enforcement actions,” making it difficult to anticipate actions taken by the Council and relevant agencies.
Although the Executive Order seeks, among other things, to promote regulatory and statutory changes to the use of non-compete clauses, the Executive Order itself consists of no definitive change. President Biden asserts that companies stifle competition and make it harder for workers to switch jobs by using non-compete agreements. Therefore, the President is encouraging the FTC to ban or limit non-compete agreements. Section 5(g) of the Executive Order provides:
“To address agreements that may unduly limit workers’ ability to change jobs, the Chair of the FTC is encouraged to consider working with the rest of the Commission 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.”
Any regulatory changes to the use of non-compete agreements are not required. Instead, they are encouraged to be considered. While other sections of the Executive Order contain deadlines and timelines for certain agencies and their actions, no such timeline is included regarding policy changes for non-compete clauses or agreements.
At first glance, the Executive Order appears to be the start of big industry changes. However, the language of the Executive Order shows that any changes to the use of non-compete agreements are uncertain and not immediate. Companies should, nevertheless, keep a close eye on the actions of the FTC for any potential regulatory changes that may be required in the upcoming months.
Written By: Angel Sims, Law Student & Trip Umbach, Partner
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