President Biden’s July 9, 2021, executive order, in which he urged the Federal Trade Commission to explore enacting rules to curtail the use of non-competes and other agreements that impede worker mobility, marks a change in approach and scope from President Obama’s efforts to address the same issue. First, in his October 2015 “State Call to Action on Non-Compete Agreements,” President Obama urged state governments to eliminate the use of non-competes for certain classes of workers based on earnings, particular occupations (public health/safety), and the circumstances of the employee’s separation from employment (lay-offs, termination without cause). Perhaps in response to President Obama’s efforts, or because of the prevailing trend against non-competes, since 2016 at least 16 states have taken action to limit the use of such agreements. Maryland is one of those states. In 2019, Maryland enacted legislation prohibiting the use of non-competes for low-wage employees. More recently, the District of Columbia banned the use of non-competes in virtually all circumstances. The goals of President Biden’s recent order, by contrast, include having a federal agency severely curtail, if not banned altogether, the use of non-competes and pursuing federal enforcement actions against employers who violate the regulations.
In light of the general movement by state governments to protect employees from unnecessary or onerous non-competes, it is unclear whether there was any practical need for President Biden to make non-competes a federal issue (other than his campaign promise to do so). Whatever President Biden’s motivation, any rules proposed by the FTC almost certainly will be met with blistering pushback from the business/corporate community during the required public notice and comment period. Any ultimate enactment also is likely to result in a flurry of litigation over the constitutionality of the federal government attempting to regulate private employment contracts.
It remains to be seen whether the FTC’s implementation of President Biden’s order will resemble Maryland’s more limited approach, which focused on protecting more vulnerable workers with limited bargaining power, or D.C.’s blanket ban on non-competes.
Either way, Luchansky Law‘s attorneys will be monitoring developments closely and will be available to explain how any new regulations affect your company’s non-compete agreements. We can be reached at (410) 522-1020 or at www.luchanskylaw.com.