September 27, 2021

Volume XI, Number 270

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September 27, 2021

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Biden Issues Executive Order Encouraging Federal Action to Limit or Ban Non-Compete Agreements

On July 9, 2021, President Biden signed the Executive Order on Promoting Competition in the American Economy, which encourages the Federal Trade Commission (“FTC”) to employ its statutory rulemaking authority “to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.”  Executive Order, Section 5(g).  While the language in the Executive Order refers to the “unfair” use of non-compete clauses, the Administration’s explanatory statement makes clear that “the President encourages the FTC to ban or limit non-compete agreements” altogether.

A comprehensive rule governing non-competes would be an unprecedented move by the federal government.  Historically, the regulation of non-compete agreements has been left to the states, many of which have recently been busy with legislation of their own.  Recent state legislation has focused, among other issues, on minimum compensation requirements for such agreements to be enforceable against employees, as well as imposing time limitations on such restrictions.  See e.g., recent posts on legislative efforts in New JerseyOregon, and Nevada.  The Executive Order does not offer any details on whether these are the types of limitations President Biden would like the FTC to consider.

It seems unlikely that the FTC will issue a complete ban on non-compete agreements.  Any attempt to impose such a ban would be met by strong opposition from the business community.  Non-competes are viewed as vital by many employers seeking to protect their trade secrets and goodwill, among other legitimate business interests.

If the FTC is “encouraged” by President Biden’s Executive Order, the administrative rulemaking process likely will take several months or even years.  So, for now, employers should continue to review their non-compete agreements for compliance with state law, and we will keep you updated on any future developments on the federal side.

©2021 Epstein Becker & Green, P.C. All rights reserved.National Law Review, Volume XI, Number 194
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About this Author

Jennifer O’Connor, Epstein Becker, non-solicitation agreements lawyer, misappropriation of trade secrets attorney
Associate

JENNIFER O’CONNOR is an Associate in the Litigation practice, in the New York office of Epstein Becker Green.

Ms. O’Connor:

  • Assists in the representation of clients in litigation matters involving the breach of non-competition and non-solicitation agreements, the misappropriation of trade secrets, and unfair competition

  • Helps clients develop proactive and efficient policies and solutions to handle demands for the preservation, management, and production of electronically...

212-351-4815
David J. Clark Attorney, Epstein Becker Green, Labor and Employment Law Attorney
Member of The Firm

David J. Clark is a Member of the Firm in the Litigation and Employment, Labor & Workforce Management practices in Epstein Becker Green’s New York office. His practice concentrates on litigating complex commercial and employment-related disputes before state and federal courts and arbitration tribunals. Mr. Clark represents clients in a wide range of industries, including financial services, advertising and media, accounting, banking, insurance, managed care, and retail brands.

212-351-3772
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