On July 9, 2021, President Biden signed an Executive Order on Promoting Competition in the American Economy (the “Order”), which, among other things, “encourage[s]” the “Chair of the [Federal Trade Commission (the “FTC”)] . . . to consider working with the rest of the Commission to exercise the FTC’s statutory rulemaking authority . . . to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.” To be clear, the Order does not impact the current state of the law or enforceability of noncompetition agreements in any context, including those between an employer and its employees, partners, or in the context of the sale of a business. Rather, it “encourage[s]” the FTC to “consider” using its authority to “curtail the unfair use of non-compete clauses.” While there was much fanfare that the Order could amount to a ban on noncompetition agreements, the text of the Order and President Biden’s remarks make it clear that is simply not the case.
According to White House Press Secretary Jen Psaki, “roughly half of private sector businesses require at least some employees to enter non-compete agreements, affecting over 30 million people.” Prior to publication of the Order, Ms. Psaki noted that it seeks to address noncompetition agreements that “affec[t] construction workers, hotel workers, many blue-collar jobs, [and] not just high-level executives.” This is consistent with President Biden’s comments upon executing the Order that it is not just highly paid workers or scientists who know an employer’s “secret formula” who are subjected to noncompetition agreements, but rather ordinary, low wage workers, such as those working in the fast-food industry, who should have protection from such agreements.