On July 9, 2021, President Biden signed an executive order targeting barriers to competition in the American economy. Believing that non-compete clauses restrict employees’ ability to change jobs and negotiate higher wages, President Biden’s executive order encourages the Federal Trade Commission to promulgate rules that curtail the unfair use of non-compete clauses. To be clear, the executive order does not invalidate any such clauses.
While it is uncertain whether or when the FTC will enact such rules, and to what extent the rules will curtail such clauses, President Biden’s executive order is consistent with a developing trend of state laws limiting or banning the use of non-compete clauses.
Employers should be aware of state laws restricting the use of non-compete clauses and should revisit their non-compete clauses to ensure they are reasonable both in duration and geographic scope. Employers should also ensure they have other less-restrictive clauses in place to protect trade secrets and confidential information and prohibit employee and customer solicitation in the event the FTC enacts the sweeping rules called for by President Biden’s executive order. For assistance in drafting or revising these clauses, please contact any BurnsBarton attorney.