President Biden signed an Executive Order on July 9 aimed at addressing issues of competition in American businesses. The order directs federal agencies, including the Federal Trade Commission (FTC) and the Attorney General, to develop proposals to minimize anti-competitive conditions in the U.S. economy. Specifically, the order targets non-compete agreements in the workplace and seeks to analyze their potential impact on worker mobility.
The objectives of the order include lowering prices for families, increasing wages for workers, and promoting innovation and economic growth. While the order does not explicitly ban or limit non-compete agreements, it encourages the FTC to use its rulemaking authority to address agreements that may unfairly restrict workers’ ability to change jobs.
Employers who use restrictive covenant agreements are advised to take several steps in response to the order:
Review the company’s program for requiring non-competition agreements for employees.
Evaluate the necessity and scope of current and future non-competition agreements, considering factors such as duration, geographical limitations, and job types.
Consider other provisions in restrictive covenant agreements or employment contracts that protect legitimate employer interests.
Review applicable state laws regarding non-compete obligations.
Consider alternatives to non-compete agreements, such as confidentiality provisions or garden leave obligations.
It’s important to note that while the order suggests potential changes to non-compete agreements, no federal agency has yet implemented any specific bans or limitations. Any adjustments to current agreements should be done with careful consideration and legal counsel.