President Biden’s 2021 executive order on competition — in which he asked the FTC Chair to regulate noncompetes — has now been revoked.
Although states have regulated noncompete agreements for over 200 years (and increasingly so in recent years), federal efforts didn’t start until after the 2014 Jimmy John’s noncompete controversy. Since then, federal noncompete regulation has been a whirlwind of activity with limited results.
Specifically, it started in 2015 with three bills to limit the use of noncompetes: two for low-wage workers and one for grocery store workers. Yep; you read that right — grocery store workers. Versions of a bill to restrict or ban noncompetes have been reintroduced in Congress every session since, including most recently the perennial bill to ban virtually all noncompetes.
Federal Executive Branch Involvement
The executive branch got involved in 2016, in the last year of President Obama’s second term in office. Following White House and Treasury Department reports on noncompete overuse, President Obama convened a small working group of federal and state lawmakers, corporate and nonprofit representatives, academics (notably Matt Marx, Evan Starr, and Orly Lobel), labor union representatives (I truly have no idea why they were there), a private practice lawyer (me), and others, including a representative from then-Vice President Biden’s office. That work resulted in the White House issuing a “Non-Compete Reform: A Policymaker’s Guide to State Policies” and a Call to Action on noncompetes, encouraging states to adopt certain fairness and transparency requirements for the use of noncompetes.
Biden’s Approach as President-Elect and President
Fast forward to late 2020 when President-elect Biden, who had been a staunch supporter of noncompete regulation or elimination, announced the following plan for noncompetes on his transition website:
Eliminate non-compete clauses and no-poaching agreements that hinder the ability of employees to seek higher wages, better benefits, and working conditions by changing employers. In the American economy, companies compete. Workers should be able to compete, too. But at some point in their careers, 40% of American workers have been subject to non-compete clauses. If workers had the freedom to move to another job, they could expect to earn 5% to 10% more – that’s an additional $2,000 to $4,000 for a worker earning $40,000 each year. These employer-driven barriers to competition are even imposed within the same company’s franchisee networks. For example, large franchisors like Jiffy Lube have no-poaching policies preventing any of their franchisees from hiring workers from another franchisee. As president, Biden will work with Congress to eliminate all non-compete agreements, except the very few that are absolutely necessary to protect a narrowly defined category of trade secrets, and outright ban all no-poaching agreements.
(For a detailed discussion of the announcement, see President Biden’s Proposed Ban of (Most) Noncompetes: Protection Strategies and Steps to Take Now.)
Once in office, President Biden took a different approach. On July 9, 2021, he issued his “Executive Order on Promoting Competition in the American Economy,” which “encouraged [FTC Chair Lina Khan] 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.” In response, I and 58 others promptly submitted a letter to the White House and FTC. (See Ask 59 Trade Secret Lawyers and Paralegals About Noncompetes and Get One Opinion.)
Impact of the Revocation
With Biden’s Executive Order withdrawn, there is no longer a presidential “request” for the FTC to pursue noncompete rulemaking. This may be what the FTC was waiting for before withdrawing its appeals in the Ryan appeal and the Properties of the Villages appeal.
At the same time, President Trump’s withdrawal of the Order aligns with FTC Chair Ferguson’s prior indication that the agency may instead regulate noncompetes through targeted enforcement actions.
So, stay tuned!
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Firm resources:
We know how hard it is to keep up with the ever-changing laws and requirements around the country for how you can protect your trade secrets, customer goodwill, and the integrity of your workforce. To help, we have created the resources below (available for free). Each chart is regularly updated to reflect the latest developments.
 | 50-State Noncompete Law Chart, the first of its kind and regularly updated (downloadable PDF) (to be updated for the new exemptions in Illinois and Pennsylvania)50-State and Federal Trade Secret Law Chart, providing a comparison of the trade secrets laws nationally to the Uniform Trade Secrets Act (downloadable PDF) |
 | Chart of Noncompete “Low-Wage” Thresholds and Criteria (downloadable) |
 | Notice requirements summary chart, providing details for each of the 8 states (plus D.C.) that has notice requirements related to noncompetes (downloadable PDF) |
 | “Changing Trade Secrets | Noncompete Laws” (dedicated blog page) now provides a current detailed summary of the changing landscape of trade secret laws and noncompete laws around the country, state by state and at the federal level |
 | Trade secret and other legitimate business interest protection plan strategy and checklist |
We hope you find all of these resources useful. More will be coming.
And please note, we are grateful for all of the input we’ve received over the years. We welcome any suggestions for improvements that you may be willing to share.