Biden Signs Executive Order Directing Restrictions on Use of Non-Compete Agreements

On July 9, 2021 President Biden issued Executive Order 14036 – announced as part of a broad government effort to promote competition within the American economy. Remarkably, this Order contains 72 initiatives to be implemented by more than a dozen federal agencies, all focusing on what the Biden administration views as widespread competition problems across the economy. Perhaps of greatest significance (and potential impact) for our clients is the directive compelling the Federal Trade Commission (FTC) to seriously restrict, and potentially bar, the use of non-compete agreements.

According to statistics cited by the White House from a 2019 Report from the Economic Policy Institute, non-compete agreements were used by approximately one-half of private-sector businesses for a least some of their employees, affecting anywhere from 36 to 60 million American workers.

The Biden Administration has taken aim at these agreements in an effort to both facilitate the ease with which workers are able to change jobs and deter anti-competitive practices within private industry.

Notably, the Order does not require a full ban on non-compete agreements, and challenges from businesses that argue these agreements are vital to protect their trade secrets and investments are anticipated. Many expect the FTC to take a more narrow approach to the Order’s mandate, potentially focusing mainly on restricting the use of non-compete agreements for low-wage workers.

Continue to watch this space, as we will be monitoring announcements from the FTC that are expected to provide further guidance on what can be expected in the future as the agency seeks to implement this Order.

Meredith S. Campbell
Chair Employment and Labor Group
Co-Chair Corporate Investigations, Governance & Risk Management

Email mcampbell@shulmanrogers.com T(301)255-0550

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