President Biden’s Executive Order on Noncompetes is Now Available – But There’s Not Much to It

Well, the updates keep coming fast and furious, but the information just trickles in.

Just out: President Biden’s Executive Order on Promoting Competition in the American Economy is now available.

The 46-page* Order mentions noncompetes in just two places:

  • “Powerful companies require workers to sign non-compete agreements that restrict their ability to change jobs.”
  • “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.”

The first point has some truth to it. But it’s not just powerful companies that use noncompetes; many companies large and small use them. And noncompetes do not usually restrict someone’s ability to change jobs just for the sake of restricting them. Usually there’s a trade-off: a restriction in exchange for the protection of the company’s recognized legitimate business interest (and the remaining employees). How those interests are balanced calls for a nuanced approach — which brings us to the second mention of noncompetes in the Order.

There’s a fair amount to unpack in the second sentence: (1) the President is “encouraging” FTC action; (2) the action that the President urges is rulemaking, which assumes the FTC has the authority to make a rule concerning noncompetes (an assumption about which I offer no comment); (3) the President is targeting the “unfair” use of noncompetes, as opposed to all uses of noncompetes; and (4) the President is not limiting his encouragement of regulation to just noncompetes, but presumably to no-poach agreements (as he previously identified) and perhaps other restrictions.

Next stop: the FTC.

We’ll keep you posted.

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* 46 pages when printed as a PDF.