President Biden targets non-competition employment agreements | Williams mullen
As expected, President Biden continued to deliver on his presidential campaign pledge to overhaul federal labor and employment laws. In a bid to protect workers and encourage competition, on July 9, 2021, President Biden launched the administration’s final salvo – a Executive Order on Promoting Competition in the United States Economy, with coordination Fact sheet explaining the basis of the presidential decree.
The Order is part of a larger effort by the Administration to facilitate the free mobility of workers within their respective industries. While the ordinance does not provide specific guidance as to the scope of restrictions that the Biden administration would ultimately want its agencies to implement, the president encourages the chairman of the Federal Trade Commission (FTC) and other federal agencies develop regulations that would prohibit or limit non-compete agreements and prohibit professional licensing restrictions that hinder employee mobility.
To do this, the Order first seeks to establish a White House Competition Council headed by the President’s Assistant for Economic Policy and the Director of the National Economic Council. The Competition Council is tasked with meeting twice a year to advance policies that, among other things, promote a competitive market, better paying jobs, and the ability for employees to change jobs and negotiate higher wages. high standards and better working conditions.
The Order then encourages the heads of all federal agencies, including the Secretary of Labor and the Secretary of the Treasury, to implement regulations to promote these efforts at free competition and employee mobility. More specifically, the Order directs the heads of these agencies “to consider using their powers … See Ordinance, section 5 (g). The ordinance encourages the FTC to use its regulatory power under the Federal Trade Commission Act to deal with non-competition clauses and similar restrictive covenants “to restrict the unfair use of … clauses or agreements that may unfairly restrict mobility workers “. Username. The executive order also orders the FTC and the Justice Department to tighten antitrust rules to prevent employers from working together to cut wages or cut benefits in their industries.
Significantly, the Executive Order does not change the law – but rather, again, simply directs federal agencies such as the FTC to engage in the rule-making process, including a period of notice and termination. public comments. And, of course, it’s safe to assume that companies will have a lot of feedback on these proposed regulations! Indeed, the US Chamber of Commerce immediately raised concerns about the executive order as evidence of too much government involvement in private industry. But, if the FTC successfully implements the regulations in accordance with President Biden’s order, the federal government will follow the lead of many states, including recent developments in Virginia and the District of Columbia – jurisdictions that have also decided to prohibit or limit non-compete agreements. . For example:
- As previously reported by Williams Mullen in our January 22, 2021 alert, the District of Columbia has banned virtually all non-compete agreements, and DC employers are prohibited from restricting employees, even moonlighting or operating their own businesses while employed by their current employer. .
- For Virginia employers, the 2020 Virginia General Assembly enacted a ban on all future non-compete agreements between employers and so-called “low-wage employees” – defined as employees who earn less than Commonwealth average weekly earnings, (See Williams mullen’s April 13, 2020 alert for more information), which is currently around $ 65,000 / year. Employers can access current salary data in Virginia through the US Bureau of Labor Statistics.
While the July 9 executive order does not immediately change the law, it sends a message to employers that the Biden administration intends to use the tools at its disposal to crack down on actual or perceived unfair competition. Employers who use non-compete agreements with their employees should also carefully monitor changes in the laws of the states in which they operate – whether through that state’s legislature or the case law of the courts of law. state – because the laws of many states tend to limit or eliminate restrictive employment covenant agreements. .