Biden’s Executive Order Cracks Down on Noncompetes

Article At A Glance:

• How does President Biden’s new executive order affect employers? 
• The Executive Order on Promoting Competition in the American Economy, issued July 9, 2021, encourages the FTC to ban or limit noncompete agreements, which prohibit workers from working for a rival company for a specified time period usually 1-2 years.
• The order encourages the FTC to ban unnecessary licensing restrictions, which limit employment opportunities to those individuals who can obtain the specific license.
• The order encourages the FTC to work with the DOJ and prevent employers from sharing wage data on workers with one another and using it to limit employee wages or benefits.

—

On July 9, 2021, President Joe Biden issued the Executive Order on Promoting Competition in the American Economy, which aims to reduce employment practices that hinder competition and increase the wages for workers and the ease in which workers can transition to new jobs. The order calls upon the Federal Trade Commission (FTC) to take several actions.

First, the order urges the FTC to ban or limit noncompete agreements. Noncompete agreements restrict a former employee from joining or creating a competitor company for a specified contractual time period, typically 1-2 years. During a press conference, White House press secretary Jen Psaki stated that noncompete agreements affect over 30 million workers in the private sector. She further stated that President Biden believed allowing workers to be able to accept other employment offered to them “makes sense.”

Second, the order urges the FTC to ban unnecessary licensing restrictions for employment. Licensing restrictions require individuals to obtain licenses to participate in certain employment opportunities. Psaki identified the importance of licensing restrictions for safety and health reasons but stated that unnecessary restrictions prevent people from getting jobs and can be especially burdensome on military families.

Third, the order urges the FTC, in conjunction with the Department of Justice, to strengthen antitrust guidance to prevent employers from sharing data on workers with other employers. Employers are currently able to share information, including data on wages, with other employers and may limit wages and/or benefits based on such information.

Contact The Lipp Law Firm if you have any questions about noncompetes and how this new executive order may impact your workplace.