Category Archives: Federal Noncompete

Knowing the noncompete and trade secret laws across 50 states, plus D.C., is no easy task. And keeping track of the flood of changes in recent years makes it all the more difficult. Unfortunately, it’s not something you can ignore. Because of this, we have created several resources that make the task easier. We hope you find them helpful.
Contracts containing restrictive covenants (noncompetes, nonsolicitation agreements, and the like) have been the province of state regulation for over 200 years. However, starting in 2015, the federal government has been stepping into the breach through proposed legislation (most recently two bills to ban all employee noncompetes and one to amend the FLSA to ban noncompetes for nonexempt workers), FTC review (starting with a workshop in January 2020), and an Executive Order (on July 9, 2021) “encouraging” the FTC to “curtail the unfair use of non-compete clauses . . . .” While that’s not news, what is news is that earlier this week (September 14, 2021), the FTC issued a public statement that — if it is as broad as it appears — seems to presume that the FTC has authority to regulate these types of contracts.
A recent paper, “The Ethics of Noncompete Clauses,” by University of Georgia Professor Harrison Frye, expands the policy discussion around noncompetes, and argues for a more thoughtful analysis. As Professor Frye details, seeing noncompetes “as solely advancing the interests of employers is myopic.”
As of Friday (July 16, 2021), we again have competing approaches to federal legislation proposing limits on noncompetes. In addition to the previously reintroduced Workforce Mobility Act, proposing an outright ban, Senators Marco Rubio (R-Fla.) and Maggie Hassan (D-NH) have now reintroduced the Freedom to Compete Act to ban noncompetes for most workers who are not exempt under the Fair Labor Standards Act of 1938.
This afternoon, President Biden signed an “Executive Order on Promoting Competition in the American Economy,” which included pushing for the regulation of noncompetes by the FTC. Based on his comments during today’s press conference (discussed in the post), we expect that any regulation will be balanced, focusing on regulating the abuses, rather than a throw-the-baby-out-with-the-bathwater wholesale ban.
With all of the changes at the state level (45 bills in 21 states, plus D.C.’s near-total ban, which is, as of yesterday, now officially adopted and pending funding, likely in the fall, it seems), the federal efforts — spearheaded by Senator Chris Murphy — continue to inch forward. During the Senate the confirmation hearing of Julie Su (currently the Secretary of the California Labor and Workforce Development Agency) for the position the Deputy Labor Secretary, Senator Chris Murphy reminds us that his bill to ban noncompetes is still in the works — and that, ultimately, he expects the FTC to regulate noncompetes.