Biden Administration Issues Executive Order Affecting Non-Competition Agreements
Earlier today, President Biden signed an executive order targeting anti-competition practices. In particular, the order directs the Federal Trade Commission (“FTC”), among other agencies, to implement rules curtailing non-competition agreements:
“This order recognizes that a whole-of-government approach is necessary to address overconcentration, monopolization, and unfair competition in the American economy. Such an approach is supported by existing statutory mandates. Agencies can and should further [these policies] by, among other things, adopting pro‑competitive regulations and approaches to procurement and spending, and by rescinding regulations that create unnecessary barriers to entry that stifle competition.”
What does this mean for California employers?
California has the nation’s most restrictive policy on non-compete agreements: They are generally not enforceable, and can render an otherwise compliant employment agreement void. Accordingly, for employers who only employ workers in California, today’s executive order and the rule changes that follow will likely have little impact on current practices. However, for employers with employees in other states, existing non-competition agreements and policies may require revision in the near future. It appears the landscape is changing. While specific guidance will take shape after the FTC and related agencies promulgate rules and regulations in response to today’s executive order, we encourage you to keep your eyes on this space and stay tuned for updates.
What should employers expect?
President Biden has indicated that the federal government aims to restrict all but the most-necessary non-competition agreements – on a nationwide basis – and to wholly eliminate “no-poaching” agreements (where the parties to the agreement agree not to compete for the other party’s respective employees). In this respect, the nation is catching up to California. While California employers remain generally unable to rely on non-competition agreements, they can still utilize employer-friendly contract language designed to protect proprietary information and trade secrets.
If you are concerned about the ways these potential regulations will impact your business, Dunn DeSantis Walt & Kendrick LLP is available to help answer questions you may have.