President Biden is preparing an Executive Order targeting non-compete clauses and further restricting the ability of employers to collude by sharing worker pay information. The FTC will also examine mergers with an eye toward monopsonies (that’s fun to say).
HOW: Mr. Biden will encourage the Federal Trade Commission (FTC) to ban or limit non-compete agreements and encourage the FTC and Justice Department to crack down on potential collusion regarding worker pay. This order is also expected to address monopsonies–mergers resulting in similar conditions to the old one-company town–by closely examining mergers.
WHAT: The goal is to allow workers the freedom to move jobs unencumbered, and to have the ability to negotiate better pay and benefits.
WHY: As we all know, Union Joe campaigned on promises of better working conditions, which includes the end of employer restrictions on most types of jobs. Non-competes have been limited in recent years by states and the courts. The trend seems that only highly paid executives would be subject to non-competes. The rise of monopsonies leaves workers in many areas with little choice on where to work and no leverage for better wages. That issue is more complex and probably not going to be changed with an Executive Order alone.
WILL IT WORK? There will be lawsuits. There is not enough federal legislative support to make law here. As a practical matter, non-competes can negatively impact hiring and the market forces cause a bigger shift. Plus, many states have limited or banned them (hello California!).
WHAT SHOULD WE DO? Except for high level executives, non-competes are increasingly frowned upon. Worth noting is non- competes are not the same as non-solicitation and non-disclosure agreements and remain a valuable tool. Your clients/customers and trade secrets/confidential information can and should be protected.
QUESTIONS?: Dare I trot out a cliche? Yes–we can be your port in the storm! We can help.