President Biden Issues Executive Order Seeking to Limit Non-Competition Agreements

On July 9, 2021, President Biden issued an Executive Order that seeks, among other things, to ban or limit non-competition agreements. Many states already limit such non-compete agreements, as opposed to non-solicitation or confidentiality agreements that are usually enforced.

Noting that “[p]owerful companies require workers to sign non-compete agreements that restrict their ability to change jobs,” the Executive Order states that “the Chair of the FTC is encouraged 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.”

While many employers enforce non-competes for a variety of reasons, the more important agreements are typically those that prevent soliciting or working with existing clients and prevent former employees from taking confidential information and trade secrets. Absent those concerns, or some very unique knowledge or skill possessed by the employee, non-competes are much harder to enforce and are often set aside as against public policy.

The Executive Order can be found here, and the Fact Sheet can be found here.