Biden targets noncompetes in Executive Order promoting competition

In a recent Executive Order (EO) on promoting competition in the American economy, President Joe Biden encouraged the Federal Trade Commission (FTC) to ban or limit noncompete agreements. In doing so, he continues (and potentially accelerates) what to date has been a piecemeal effort conducted almost exclusively at the state level to limit and, in some cases, prohibit the use of noncompetes, particularly for low-wage workers.

What's driving Biden's order

The Biden administration is clearly concerned about the perceived lack of labor mobility and what it sees as the artificial depression of wages, and it believes noncompete agreements (particularly for employees at the lower end of the wage scale) contribute to these issues.

Although the EO itself doesn't create new rules or prohibit or limit noncompete agreements, the fact sheet accompanying the order makes the administration's intent clear: It wants the FTC "to ban or limit non-compete agreements."

How EO affects noncompetes

Biden's EO identifies noncompete restrictions as one way companies can stifle competition, and it encourages the FTC to ban or limit them. It also encourages the agency to ban unnecessary occupational licensing restrictions that impede economic mobility.