New Executive Order Targeting Employee Non-Compete Agreements

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New Executive Order Targeting Employee Non-Compete Agreements

On July 9, 2021, President Biden made good on a campaign promise to address employment non-compete agreements by issuing a sweeping executive order called “Promoting Competition in the American Economy Order.” Although it does not immediately change the current legal landscape governing non-compete agreements (or any other aspects of U.S. antitrust enforcement) it encourages the Federal Trade Commission (FTC) to ban or limit noncompete agreements.  This order specifically targets barriers to competition.  The Biden Administration believes limiting or banning the use of non-competition agreements will increase economic growth and increase wages to allow workers mobility to switch to better-paying jobs.

Historically, non-compete agreements have been regulated by the states, not the federal government.  According to the “White House” the “Order” includes seventy-two initiatives by more than a dozen federal agencies to promptly tackle what the Administration believes are some of the most pressing competition problems across our economy. One provision in the “Order” takes direct aim at non-competes by encouraging the FTC to consider working with the rest of the Commission to exercise the FTC’s statutory rulemaking authority under the Federal Trade Commission Act and to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.  Although the Executive Order refers to the “unfair” use of non-compete clauses, the White House’s explanatory fact sheet makes clear that “the President” encourages the FTC to ban or limit non-compete agreements.

What is the likely outcome and what should businesses do to prepare for these changes?

The FTC’s administrative rulemaking process regarding non-compete agreements will take several months, if not longer, to come to fruition.  Non-compete agreements typically are designed to protect an employer’s trade secrets and confidential information and also serve to prevent employees from taking a job with a competitor that would put the former employer’s trade secrets at risk.  However, employers should consider reviewing their workers non-compete agreements for compliance with state law and with consideration of future possible federal action limiting the enforceability of such agreements.

Some states, such as California, have banned non-compete agreements in most circumstances.  Employers would be wise to revisit the protections they have in place and consider whether non-compete agreements are necessary. Employers may want to consider investing in employee training programs and should discuss with their counsel alternative strategies, policies, and best practices.

Here at Epps & Coulson, LLP we understand that these new orders may be confusing. We are available to advise. Feel free to contact Dawn:

For more information on President Biden’s July 9th order go to:

Information contained in this Memo is intended for informational and educational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney. It is considered advertising under laws of some states. Epps & Coulson, LLP encourages you to call to discuss these matters as they apply to you or your business.


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