President Biden Signs Executive Order Targeting Employee Noncompete Agreements

July 9, 2021

Today, July 9, 2021, President Joe Biden issued an executive order aimed at restricting the use of noncompete agreements by private employers.

The order calls on the Federal Trade Commission (FTC) to adopt new rules to curtail noncompete agreements in the private business sector. Casting the order as a fulfilment of Biden’s campaign promise to promote competition in labor markets, the administration claimed that roughly half of private sector businesses require at least some employees to enter noncompete agreements, ultimately affecting more than 30 million employees in a variety of industries. The stated goal of the order is to raise employee wages and make it easier for workers to change jobs and move between states.

The order also calls on the FTC to adopt new rules cracking down on “unnecessary” or overly burdensome occupational licensing requirements. Noting that almost 30 percent of jobs require a license, the White House expressed concern that overly burdensome requirements can lock workers out of jobs and particularly impact military families.

Additional reporting indicated that a third initiative of the order will be to encourage the FTC and the Department of Justice (DOJ) to strengthen antitrust guidance to further restrict employers’ ability to share information with each other regarding worker pay. The order will also encourage antitrust regulators to be increasingly wary of mergers that might lead to labor monopsonies — i.e., industries dominated by a small group of employers.

The executive order is a further indication of the new administration’s push to challenge employment practices it deems anticompetitive. The DOJ recently brought three criminal cases addressing alleged collusion in labor markets, and indicted two companies and three individuals in those cases.

McGuireWoods has a team of experienced antitrust and labor and employment attorneys monitoring this development and available to respond to your inquiries regarding its impact on your business.